Good afternoon ladies and gentlemen, and welcome to the Universal Technical Institute Incorporation’s Fiscal First Quarter 2008 Conference Call. At this time all participants are on a listen-only mode. Following today’s presentation, instructions will be given for the question-and-answer session. [Operator Instructions]. As a remainder, today’s conference call is being recorded. A replay of this call will be available for 90 days at www.uti.edu, or alternatively, the call will be available through February 13, 2008 by dialing 800-405-2236 or 303-590-3000 and entering passcode 11107348 followed by the pound sign. At this time, I’d like to turn the conference over to Ms. Jennifer Haslip, Chief Financial Officer of Universal Technical Institute. Please go ahead.

Hello and thank you for joining us today for Universal Technical Institute’s quarterly conference call. During the call, we will discuss the results of our fiscal quarter ended December 31, 2007, and then open the call up for your questions. The company’s earnings release was issued after market close today, and is available on UTI’s website, at www.UTI.edu. Before we begin, we would like to remind everyone that except for historical information presented, the matters discussed today may contain forward-looking statements under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. I will refer you to today’s news release for UTI’s comments on that topic. The Safe Harbor in this release, which I will not repeat here in the interest of time, also applies to all statements made during this conference call. Information on this conference call, including the initial statements by management, as well as answers to questions related in any way to a projection or forward-looking statement are subject to the Safe Harbor statement. At this time, I would like to turn the call over to Kim McWaters, Chief Executive Officer. Kim?

Thank you, Jennifer. Good afternoon, ladies and gentlemen. Thank you for joining us to review our first quarter 2008 results. On today’s call, I will provide a high-level overview of the quarter, Jennifer will follow with a more detailed review of our financial results, and I will close with an update on the lending environment and key business initiatives before opening up the call to your questions. Our net revenues for the first quarter were 90 million, up 0.6% from the prior year. Net income for the first quarter was 6.5 million, as compared to net income of 6.9 million for the same quarter a year ago. Our operating performance overall was fairly consistent with the prior year for both revenue and earnings per share, which was provided in our press release earlier today. Educational services and facilities costs were higher than prior year, primarily as a result of increased occupancy costs related to our sale and leaseback transactions, and were partially offset by lower compensation costs, created from aligning our cost structure with our existing student population in September of 2007. Selling, general and administrative costs were lower than the prior year, primarily related to less advertising spent during the quarter, as well as lower compensation costs. In addition, our tax rate was higher in the current period due to lower state tax credits this year. These factors contributed to $0.24 of diluted earnings per share for the first quarter of 2008, compared to diluted earnings per share of $0.26 a year ago. Overall, the first quarter remained challenging from a student recruitment standpoint. On a year-over-year basis contracts were down 11.3%. Both campus and field sales teams were down year-over-year. Field was down on a comparative basis year-over-year as expected due to the consolidation of 24 poorly performing…

Thank you, Kim. As Kim mentioned, net revenues for the first quarter of fiscal 2008 were 90 million, up 0.6% from 89.5 million reported in the same quarter last year. The increase was primarily driven by higher tuition rates of 3 to 5% and one additional revenue earning day during the quarter. The extra earning day equated to approximately $1.4 million in revenue, or 165 basis points of growth, and was partially offset by lower average student enrollment of approximately 400 basis points for the quarter, and higher scholarships and discounts of approximately 210 basis points. Our operating income for the first quarter of fiscal 2008 was 9.3 million, compared with operating income of 10.5 million in the same period during the previous year. Operating margin for the first quarter of fiscal 2008 was 10.3%, compared with operating margin of 11.8% for the same period a year ago. On a percentage basis, the change primarily relates to increased occupancy costs of 200 basis points, contract services of 170 basis points, as well as a variety of less significant categories, partially offset by lower advertising costs of 280 basis points. Net interest income for the quarter was $1.4 million compared with net interest income of 661,000 for the same period last year. Our tax rate for the first quarter of fiscal 2008 was 39.2%, compared with a tax benefit of 24.9% for the fourth quarter of 2007 and tax expense of 38.2% for the first quarter of fiscal 2007. The higher tax rate in the first quarter of fiscal 2008 was the result of lower state tax credits. In the future, we would expect our tax rate to range from 37 to 39%, absent unusual items. Net income for the first quarter of fiscal 2008 was 6.5 million or $0.24 per…

Thank you, Jennifer. Before we open up the call for questions, I’d just like to provide an update on the key initiatives in the areas of marketing and sales, student finance and operational efficiency. Let’s start with marketing. Based on historical trending, this quarter’s spending was reduced to focus on lead quality and efficiency rather than generating inefficient lead volume. Spending this quarter was reduced in broadcast media and focused predominantly toward online media to optimize our lead generation efforts within the constraining market conditions, specifically, the holidays and political campaign season. Due to the changes in media mix balance, we did experience a 13% decline in Internet leads year-over-year, which is attributed to the 64% decrease in spending in broadcast media, as historical data reflects that one media type supports the success of the other. Although lead volume was down for the quarter, it should be noted that in spite of reducing our overall media spend by 42% compared to the first quarter in 2007, our lead capture only decreased by 27%, showing some efficiency gains with our change in strategy. Marketing does plan to increase spending in subsequent periods that are traditionally more productive and efficient. Total cost per lead was down approximately 20%. In the first quarter of 2008, we successfully concluded local marketing pilots. Notable results included increase in enrollments as well as visits to the campuses and markets where integrated media plans and event promotions were tested. Learning’s from these local market tests were applied to the development of a fully integrated multimedia national campaign that kicked off December 31. As of January 31, national television advertising generated roughly the same number of leads as last year, at 50% of the spend. We continue to commit additional resources to local event marketing in and around…

Thank you. Ladies and gentlemen, at this time we’ll begin the question-and-answer session. Please only ask one question and re-queue for additional questions. If time permits, we will continue to answer questions. [Operator Instructions]. One moment please, for the first question. Our first question comes from the line of Edward Yruma with JP Morgan. Please go ahead. Edward Yruma:

Sure. We’ve had several conversations since we were notified by Sallie Mae that they were going to discount that or discontinue that program. And Genesis is very willing to take on that volume, and actually increase it, if there’s an opportunity to do so. We do also think there’s some opportunity for us to to improve the terms of the underlying contract, because they’re receiving better credits than they otherwise would have now that that other program is discontinued.

Got you. So you do have existing availability and you expect that to expand?

Yes.

Okay. And can you give us a quick update on the amount of students that you have on cash pay? Jennifer Haslip: Well, actually, we have a number of students that would be making cash payments as they go through school, but if you look on a percentage of revenue as to how many -- what percentage of revenue comes in from cash and credit card payments, it would be both, it’s around 17.5%

Got you. Right. Very good. Thank you.

Thank you. The next question comes from the line of Mark Marostica with Piper Jaffray. Please go ahead.

Thank you. I wanted to ask about your January start performance, and also an update on just the number of contracts, or growth or decline in contracts in January. Thanks.

As I said, we saw improvement with the campus-based representatives of 4%. Field was down in low double-digits for the month of January. And they are for the same reasons that we cited that we expect to see pressure, and that is a number of open territories, the delay in the tuition increase, and then underperformance in some key territories.

Okay. I wasn’t sure what time period that was for. So that was for January. Okay. And then just as a follow-up, do you think you’re starting to see any effects from the new website, or is that still yet to come?

Well, all of the statistics I shared with you in terms of traffic, visitation, and the business, I mean, the inquiries that we’re getting off of the website have been very positive. I guess the trafficking and some of the most basic measures of an Internet site’s success have exceeded our expectations inside of the first month, especially given that we changed our URL to be more user-friendly. And so, I think overall we’re pleased with it, but the leads that have been generated in the January timeframe from the new website have not really been in the pipeline long enough to be converted into contracts, and certainly not start. But we are encouraged by what we’re getting out of it.

Okay. Thank you.

Thank you. The next question comes from the line of Jeff Silber with BMO Capital Markets. Please go ahead.

Hi. I was wondering if we can just step back for a minute. If you can review with us, in terms of your exposure to alternative lending, who they’re with; roughly, you gave us some data on the Sallie Mae tier program, but some other data on the exposure you have there as well. And what if any recourse you have on any of these agreements. I think that would help us all out a lot. Thanks.

Okay. Well, on a percentage of revenue basis, I would say it’s right around 3% of revenue that has some elements tied to it of a discount program or where we’re sharing the risks. I would say that there is definitely a tiered program and so the better the credit scores, even if they are in more of the sub-prime markets, the higher they are, the last recourse that we would ultimately be required to pay. The Genesis program had been primarily in place to fund those students who really had very poor credit. And it is serving a need from that perspective, and we do have up to 95% recourse on those specific programs.

We have about 1.5 million right now that’s been funded through -- that would have been through mid-January, I guess, and about 200 students that are participating in that program. I would guess that if you were to look at the number of students on a percentage basis that this would impact, it would be somewhere between 6 and 7%, that they would need some portion under these programs. So, it’s a fairly small component of our overall business.

Okay, great. And in terms of where the discounts are recorded, is that reduction to revenue or is that in bad debt expense?

That is as a reduction to revenue.

Okay. Fantastic. Thanks so much.

Thank you. The next question comes from the line of Kevin Doherty with Banc of America Securities. Please go ahead. Kevin Doherty: Great. Thanks Kim and Jennifer. I had a question on your revenue per average student. I know that’s a bit stronger than we had expected; maybe we were looking for a bit of a pullback there. I guess I’m just a little surprised with some of the scholarships and discounts that you’ve been giving. Besides the extra day in the quarter, was there any beneficial mix shift that maybe would have kept that average number up relative to where it’s been trending?

Okay. And then I might have missed this, but what was the reason for the timing change in terms of the price increases that are going to now be coming on April 1st? Kimberly McWaters: The reason was that we wanted to evaluate what the key challenges were in terms of overall pricing and affordability. And we’ve completed our research with our current student population, no-shows and a random population, just to gain insight into students’ perspective on the cost of education, the tuition, and the overall monthly payment. There have been a number of things that we’ve learned from our research, and also running pricing models that suggested if we tried a couple of different things, we could start to zero in on what made sense to the majority of the students. And the things that I identified in our prepared remarks that we had done, one was offering a program that was at a lower cost; the tuition was roughly 15,000; it could get their monthly payment to under $200 a month. And we thought that if that is the key driver, there’s going to be strong interest in this program. Well, in fact, the students continue to want more courses than not. And if we can provide them a legitimate funding source, they’re interested in it. And so, when we started to see the amounts on the Pell and the loans increase, as well as continued decreases in interest rates, and the fact that we were able with the efforts of Jennifer and team last year to put some other lenders in place, that we can cover the needs of our students. And so because the 3% increase is basically more than offset by the decrease in the interest rates and the increase in the loan and grant amount, it made sense to do it. But when we would normally consider doing this in December, we had not completed all of our research and were not comfortable or confident in doing that at that point in time. And we made the decision probably two weeks ago that April 1, we would increase tuition by 3%.

Okay. Thanks for the color Kim.

Thank you. The next question comes from the line of Gary Bisbee with Lehman Brothers. Please go ahead. Gary Bisbee: Hi, good afternoon. I wanted to ask about the advertising cost. You said it was down quite a bit. And I guess number -- the two-part question. Number one, sort of how do you think about that? It sounded like a very dramatic cutback. And number two, is a lot of that just the seasonal period, and you expect to ramp that back up dramatically from these levels? Or is this more of a starting point as to how we should think about that spend going forward?

Good questions. If you think about the first quarter in ‘07, we significantly increased our spend in media broadcast television advertising. And we did not get the return on investment that we would expect. And when we analyzed that, what we saw was that there was a lot of clutter in the market relative to retailer advertising for the holidays, et cetera, and decided that we would be better off shifting those resources into the subsequent quarters and supporting our new campaign and launch that was going to happen in January, versus spending money in a quarter where we’re not confident that our advertising strategy was delivering what it should. And we knew that we were up against a tough environment with the heavy advertising and a lot of clutter in the marketplace, and decided to postpone that. So we will be spending that money, but think that it is put to better use now that we have learned and have learned from our pilots that we tested inside of that quarter, as well as the success that we are experiencing with our new national campaign. So I mean the win here is that we reduced it significantly in that first quarter, and we were able to, inside of the month of January, continue to reduce television spend, and generated the same number of leads from a television standpoint as we did last January at 50% of the cost. And that is a reflection of, I’d say, refined messaging and positioning that’s more relevant to our target audience. It is also a switch in philosophy from the long form, the 30-minute infomercial, to more frequent 30 and 60-second spots. And it’s a fully integrated campaign that’s supported by a number of marketing vehicles as well. So it was very intentional, and based on the analysis of what worked last year, what didn’t work last year, and what we have learned over the last couple of quarters with our testing and research.

And so just to follow-up on that, is it likely that it would actually rise year-over-year? It looks like the second quarter last year you also had a big year-over-year bump. I’m just trying to get a sense as to how it trends? Is that couple million that it was down year-over-year, is that going to go into the second quarter or go into the next couple quarters? Or is that efficiency you just mentioned, the 50% lower TV spend but the same leads going to be a pattern you think you’ll repeat, and so the spend might actually drop for the full year? Thanks.

If we get the results that we’re getting in January, I will support increasing the advertising spends, and we will continue to monitor that. But the intention was that we would take what we have spent in Q1 and basically spread it from January through May. And if we continue to see these types of results, it’s likely that we could see higher spending, because that’s what starts the admissions engine running.

Okay. Thank you.

Thank you. The next question comes from the line of Jerry Herman with Stifel Nicolaus. Please go ahead.

Thanks. Good afternoon everybody. Just to follow-up on Gary’s line of thinking there. When you guys did your cost reduction program a year ago, you talked about that savings being reinvested into sales and marketing. And based on what happened in the first quarter, but also taking into account what you just said, does it look like you will in fact capture some efficiencies and therefore, maybe not totally reinvest those savings for the full year?

I think it’s too early to tell, honestly. But, we didn’t spend it all inside of the first quarter, because we wanted to do it with a measured approach to determine whether or not it was going to yield the return on investment that we expect. And as we measure everything that we’re doing, and we prove a good return on investment, we will increase. And we know that that’s kind of the top of where we’ll go inside of this year, because it’s very important to make certain that we’re not generating more leads than what our admissions and sales rep team can handle. So we try to, again, take a very measured approach with lead volume in alignment with our sales structure and staffing. Now, if we can continue to generate the number of leads, and the quality of leads through our broadcast media at 50% of the spend, we are certainly going to do that, we would just ramp up. So we’re not going to spend it just to spend it. It will be based on a return on investment, recognizing that this is what begins to fill the pipeline, especially when we see a number of other things starting to improve. The key focus here now is driving the number of contracts and applications higher, and that will come from effective advertising and marketing. So, we are going to build on our successes.

Great. Can I follow up with funding question? Jennifer you did a good job of sort of breaking up the pie and as we look at the numbers, I think last year Title IV was like 68% of your revenue. Then you indicated cash and credit cards 17.5%. It looks like the private loan piece is 3 or 4%. What fills in the rest of the pie? Where do they get the rest of the funding?

Well, the biggest piece is going to be in regular signature-type loan products where students or their parents qualify to just -- on their own creditworthiness get it and that tends to be between 10 and 11%. And then, of course Custom Training Group makes up about 5% of our overall revenue stream because it -- and it is not subject to Title IV restrictions, it’s paid by the larger OEMs and so just not subject to the same type of risk.

Great. Thanks very much.

Thank you. The next question comes from the line of Tom Smith with First Analysis. Please go ahead.

Hi, it’s Corey Greendale and Tom Smith. Wanted to follow-up on a couple of points other people have raised. First of all, the fact that you’re raising price, I assume, speaks to the fact that you’re not seeing a lot of student concerns about funding. But more anecdotally, are you hearing more objections raised about price, more concerns about whether money is going to be available, either from prospective students or existing students?

I think that tuition and affordability remains -- the cost of education remains the number-one concern for our students. Regardless of all of the things that we’re doing to address it, it is still a top concern of focus. And we are trying to implement a number of things that give them the flexibility, whether it be the overall sticker price or tuition costs, or the monthly payments on an affordable basis. And we now believe that we have vehicles in place to address those things. So short of a total reinvention of our cost structure and education delivery model, which we are also evaluating, we did believe that we had room to increase the tuition based on the things that we’re doing and the changes that were happening in the external environment as well.

Okay, understood and just a modeling question if you could help. Given the delay in the tuition price increase, or the change in the timing, is it fair to assume in the March quarter you’re not going to see the same kind of increase in revenue per student that you saw in the current -- in the quarter you just reported? And also, is there an offset at some point in the year when you had the extra day this quarter? Is there another quarter this year when you’re going to see one fewer day of revenue?

On the first question, I think that what’s going to work against us in the upcoming quarters is going to be the increased number of scholarships that we are awarding and the tuition discounts that we will be seeing coming through. But, I don’t think the change in the rate will have much of an impact. You might see a little bit of it in the fourth quarter of this year, but more of the impact would be in ‘09, because there’s longer timeframe for when students sign a contract and come to school. On the other, I would have to look at the calendar to see if there’s another quarter that has an offset earnings day; I have not looked ahead to do that.

Okay. We will follow-up. Thank you.

Thank you. [Operator Instructions]. Our next question is a follow-up question from the line of Jeff Silber with BMO Capital Markets. Please go ahead.

Thanks so much. Kim, I think in your prepared remarks you talked about potentially seeing the benefits of a slowing economy going forward. I’m assuming you have not seen that, or you don’t think you’ve seen that as of yet. If so, how long of a lag do we typically see between a slowing economy and a pickup in your enrollment?

That’s a good question and I am not certain I have an answer for you on the lag in the time -- in between. I don’t think that we have seen that yet at the campuses. With the exception of what we’ve experienced in Orlando, there is nothing significant out there that says to me this is a result of changing dynamics in the unemployment rates. I think certainly the lower interest rates, that’s a positive message that can be delivered immediately. But we still have – we are not feeling it, we still haven’t felt it. But I do believe that we will start to feel it sometime inside of this year, but I can’t give you the specifics as to when. I wish I could.

Yeah, I was just more curious in terms of history, you’ve been with the company a while?

The problem with that is that when we did experienced this in the past, most of our students were high school students and we were much smaller in size and we offset it by just going into new territories that we had not been in and basically filled the gap. So, it’s a different dynamic right now, but I can tell you that when you look at the unemployment rate for the male 20 to 24, our average start growth rate tracks almost identically very strong correlation to that trend marks. So, as this starts to come up, it will follow behind it. Its just I can’t give you the specific timing in months. But, we will start to feel it and there is a possibility that we already are, it’s just that we don’t know it, meaning our people on the front lines are not attributing it to that at this point in time.

Okay, and that’s fair. Just a couple of quick numbers questions. Can we get bad debt expense and stock-based compensation for the quarter?

Sure. Stock-based compensation, there was about 180,000 in the educational and services facilities line and there was another 1.4 million in SG&A. And then, bad debt -- bear with me just a second -- bad debt was roughly just under $1 million for the first quarter.

Alright. Great, I will let somebody jump on. Thanks.

Thank you. The next question is a follow-up question from the line of Gary Bisbee with Lehman Brothers. Please go ahead.

Yeah, hi. How quickly do the adult students historically start after signing a contract? I guess what I’m trying to get at with the lower spending and the weaker lead flow and contracts in the first quarter, what’s the lag going to be if things do get better, if this trend you’re seeing in January continues? Is it this summer before things get better? Is it pretty quick turnaround?

With the adult students, depending on where they’re originating from, meaning within a 50-mile radius of the campus, you could see students starting within 4 to 6 weeks if they’re coming from the local market, and/or it could be pushed out to 4 to 5 months if they’re having to relocate to attend one of our sites. And that is the reason that we put so much focus on the adult and local market marketing efforts surrounding our campuses. Because even though it takes -- or those efforts produce fewer leads, they are higher-quality leads; they typically enroll faster and show to school at higher rates. And so that’s been the shift, which kind of creates a mixed message when you’re talking about lead volume being down. And we’ve been talking around that up to this point, that when you start to focus a blend with national and local efforts, local efforts are always going to produce fewer leads, but the reality is they’re going to make application and start sooner than those coming from a national basis having to relocate. So until I have the mix on what that starts to look like coming out of the January/February lead generation results, I would say you’re going to see a mix between those that can start 6 weeks out to 5 months.

Okay. And then just one last follow-up, which is the second quarter in a row you mentioned the three options to help deal with the undercapacity, or underutilization issue, to get more deals with OEMs, new programs, or actually sublease capacity. Any update on any of those three? And what’s a realistic timing to make progress on those strategies? Thanks.

I do believe that we are making progress. As I said before, we have engaged a real estate consulting -- commercial real estate consultant. We have looked at all of our campuses and are evaluating those based on the strategic needs of the business, lease terms, condition of campuses, ideal sites, and are making good progress there. But it’s a longer-term business challenge and issue, given the fact that we have long-term leases. And so I would say that we’re making progress on all three of those areas, but it’s probably a two-year timeframe before you’re going to see significant changes in there. We’ll just keep chipping away at it bit by bit. But you’ve probably got a 24-month window before you see real changes.

Well, I can tell you what we did at our Houston campus, in the late ‘80s and early ‘90s, we basically closed down two buildings and sublet it until our student population started to increase. And it was -- it wasn’t -- it was a manufacturing-type business, mail house, and we had two types of businesses running out of there, not UTI, but whoever we leased it to. And when the business rebounded, we booted them out. So, I mean, you’ve seen the facilities. You can convert the larger warehouse spaces into other use. And some of other classrooms you can do as well. Now, I think that it’s more likely that we could be sharing the space with those who have training needs from an industry standpoint; that’s our first priority. But we will consider anybody that thinks that they can use the space, and we’re actively pursuing that. Most obvious is what we’re trying to do with our home office and moving some of our team members out to the Avondale site. And we’ve already done that and our now trying to sublet some of the space that we occupied in a corporate capacity. And we are currently evaluating how to do that on a bigger scale. So there’s progress there, and we’re keeping all options open, at the same time, making certain that we’re optimizing all of our efforts in the local market to reground and fill the capacity that we can, because filling the seats is, obviously, going to create greater value than subletting any of the space. So we’re doing it simultaneously on parallel paths.

Okay. Thanks.

Thank you. The next question comes from the line of Mark Marostica with Piper Jaffray. Please go ahead.

Yes. In regards to the field performance again, give us a sense when you will anniversary the territory realignment of those 24 poorly-performing schools, or regions, excuse me, and also, similarly, when we’ll anniversary the lead distribution policy change.

The anniversary of the lead policy change would be midsummer, so probably July/August timeframe. And the new sales territory restructuring, in terms of having those filled and realigned, would be September.

Great. Thank you.

Thank you. Ms. McWaters, there are no further questions at this time. Please continue.

In closing, I do believe we are starting to see momentum build as the result of our initiatives. And while it requires a few more months or quarters to confidently state that trends are reversing, I am pleased with the progress we are making. Thank you for your interest in UTI, and have a great evening.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.