Hello and welcome to the UTI Fiscal First Quarter 2020 Earnings Call. [Operator Instructions] At this time all participants are in a listen-only mode, and after today’s prepared remarks we will open the lines for questions. As a reminder, today's call is being recorded.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 our CEO Jerome Grant; and CFO Troy Anderson. During the call today, we'll update you on our fiscal first quarter 2020 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 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. During today's call, we'll refer to adjusted operating income or loss, adjusted EBITDA and adjusted free cash flow, which are non-GAAP measures. Adjusted operating income or loss is income or loss from operations, adjusted for items that affect trends in underlying performance from year-to-year and are not considered normal recurring cash operating expenses.Adjusted EBITDA is net income or loss before interest expense, interest income, income taxes, depreciation, amortization and adjusted for items not considered as part of the company's normal recurring operations.Adjusted free cash flow is net cash provided by or used in operating activities less capital expenditures, adjusted for items not considered as part of the company's normal recurring operations. Management uses adjusted operating income and loss, adjusted EBITDA and adjusted free cash flow as performance measures internally, and those will be the figures discussed on today's call.Starting with the third quarter of fiscal 2019 and through fiscal 2020, we will report operating metrics such as student applications and starts, excluding our Norwood, Massachusetts campus. As we have shared previously, Norwood stopped accepting new student applications in the second quarter of fiscal 2019, and will fully close before the end of fiscal year 2020. So we believe it is appropriate to exclude its impact.It is now my pleasure to turn the call to Jerome Grant.

Thank you, Jody. Good afternoon, everyone, and thank you all for joining us today. I particularly like to welcome the notable number of new investors and analysts who have joined us since our last update. We sincerely appreciate your interest and investment in UTI and look forward to working with you in the future.In the first quarter of 2020, UTI delivered excellent results across all of our key metrics, demonstrating the success of our strategy to improve operating performance and pivot the business towards its next phase of growth.In the first quarter revenue was up 5% compared to last year. New student starts, we're 1,594 which represents a 7.7% increase over Q1 2019. New enrollments grew 3.3% and we generated higher revenue per student. That solid top line growth coupled with our success in optimizing costs generated first quarter operating income of $4.3 million, net income of $4.7 million and adjusted EBITDA of $10.1 million.Behind those results, our innovative dedicated team worked aggressively to deliver on our three-pronged strategy of building new profitable campuses and offering new programs, transforming marketing admissions, and our student journey and optimizing our cost structure with a keen focus on rationalizing our real estate footprint.All three of these strategic elements are designed not only to further drive shareholder value creation, but also to enhance the Company's value proposition to our students, thereby positioning the company for the long-term success across any phase of the economic cycle.While we made progress on each of these focus areas in the first quarter, I'd like to highlight two recent accomplishments in particular that fall into the areas of offering new and enhanced programs. The growth of our welding program and the expansion of our partnership with Volvo, based on the initial success of our first three welding technology programs…

Thank you, Jerome. With our Q1 results, we're starting the year on a very positive note. First quarter revenue of $87.2 million was up 5% compared to the prior year first quarter. This was primarily driven by an average full time enrollment increase of 3.3% and a revenue per student increase of 1.6%. Regarding our key student metrics, first quarter new students starts were up 7.7% with both high school and adults segments showing strong growth.Adults starts have grown year-over-year for five consecutive quarters, which is especially notable given continued strength in the economy. Military was down slightly in the quarter after a significant uptick in starts in Q1 of fiscal 2019 where we had benefited from additional military reps and other improvements. We feel very positive about the opportunity and our progress overall in the military channel, but face challenges around base access retention efforts from the armed forces and strong demand for veterans from employers.First quarter new student applications increased 3.7% year-over-year with growth driven by high-school and military. The increase in applications reflects our enhanced marketing mix, more rep generated leads and increased productivity and continued refinement of our grant programs. Our show rate improved 90 basis points in Q1.Improvements were driven by broad-based efforts including refinements to grants and student contact strategies and increase effectiveness across our campus operations. In addition to driving revenue growth, we're also maintaining focus on optimizing our cost structure.In the first quarter operating expenses decreased 8.1% year-over-year, driven by reduced expenses for contract and professional services, advertising and compensation related expenses. We ended the quarter with head count of approximately 1,650 down 120 versus last year's quarter and 20 versus the end of fiscal 2019. The year-over-year reduction reflects improved efficiency in our operations throughout the last 12 months and we…

Thanks Troy. It's clear that this company has set a solid foundation for significant growth opportunity and we're continuing to refine our strategies, but what has and will always drive us is the exceptional potential of our students and the commitment of our team. We're driven by students like Ricky who was part of our first automotive class at our newest campus in Bloomfield, New Jersey.Ricky shared with us that he's from a first generation immigrant family. He was raised in a Spanish speaking household and when he came to UTI he became the first in his family to get an education beyond high school. Ricky excelled in our core auto program, took the Ford FACT advanced training program and just two weeks before he graduated got his dream job at a Ford dealership near his house.Now I tell you this story not just because it illustrates the power of our industry partnerships or why we're building metro model campuses that let students go to school near their home, but because we believe that our team's passion, our genuine care for our students and their lives is a true competitive advantage.In a world where higher education is under fire and college graduates often struggle to find good jobs in their fields of study, those differentiators set UTI apart. And as we build on those significant fundamental competitive advantages, we're confident we can change more student lives, support our industry partners with the talent they need and deliver more value to our shareholders.I'd now like to turn the call over to the operator for Q&A. Operator?

Yes, thank you. [Operator Instructions] And the first question comes from Raj Sharma with B. Riley FBR.

Hi, good afternoon guys. Thanks for taking my questions. And congratulations on a really good quarter. I just wanted to ask a few questions on the welding. So the welding going to the six programs would then compromise about 7.5% of starts. Is that right for the year?

Hi Roger, this is Troy and thanks for the question. Each welding program will roughly equate to, add 12,000-ish start per year, is about 1.5% of starts. They can fluctuate obviously year to year, but where they're all designed around the same size. So if we have six programs ultimately and nothing else changed, that would be roughly 9%, but they're incremental starts, right, they are new starts. So we would be growing total starts with that.

Now is the tuition rate for those different than the average? And so I'm just trying to estimate sort of a revenue impact from these additional two programs.

Yes. So those are shorter programs. They are 36 week programs and they're going to be lower than say, the core auto program or a diesel program or obviously if you start adding in the electives. So they're going to be in the low, low twenties. And the core programs are in the – our average overall is about 30,000 31,000 per student.

Got it. And then my other question is on operating expenses, now what is a good sort of run rate for OpEx that we should model? Is this the $83 million is that a good sort of steady run rate? And I know that you've – I see that some of the real estate rationalizations are ahead of schedule. Is that right for the Exton and also for the corporate? Is that, is that sort of reduction? How should we think about that in terms of the run rate that we're seeing today?

Yes, I mean we, if you look at right where we are today this quarter we printed roughly $83 million, as you said. We were about $82 million last quarter. So we're in sort of that run rate place. It fluctuates a little bit with our student fluctuations as we have staffing, to meet that. And then things like the real estate improvements, would be bringing that down. We have some other things coming back in with some additional expenses, as we make some investments back in the business, like the welding programs.So it's, there's some puts and takes, but we're probably at a about our run rate, in this low eighties range.

And that accounts for the rationalizations of real estate that are sort of ahead to schedule.

Well, Exton was maybe a little bit ahead of schedule, but yeah, maybe a few months. It wasn't dramatically. The headquarters move will be later in the year. So we won't see much benefit from that, in the quarter we’ll have some move expenses and things like that, that will mute any run rate benefit. But the go-forward benefits are absolutely, will be there. But yes, so I'd say we're roughly, at a run rate place.

Got it. Okay. So I'll stop my questions and I'll be in the queue. Thanks.

Great. Thanks.

Thank you. And then that's the question comes from Austin Moldow with Canaccord.

Hi, thanks for taking my questions. First one is on the welding program. Can you talk about what's required to fill those seats? And when you open these new programs, what kinds of advertising and marketing or is there just, such a supply and demand balance where the seats basically like fill themselves?

Well, they don't just fill themselves. We do have a launch strategy associated with any new program we put onto campus. The demand is very high though. And request even from within our core auto population to continue on and potentially take a welding program on top of core auto is there as well. We have a sort of highly geographic specific digital strategy that surrounds our campuses, both on social media paid search, paid social, which we have the op around our welding launches and so that's been in place as we've been starting to write enrollments to Houston and we'll do it later this year as we approached the start date for Long Beach.

Got it. So can you talk through 2020 guidance? I know it was left unchanged, but it sounds like the welding programs are incremental. So can you just walk us through, how you think about revenue and EBITDA in terms of incremental marketing that's happening here and what's changed from the last time you reported and today where you're reaffirming that?

Yes. This is Troy. Thanks Austin. Just to be clear, the Houston program was part of our fiscal 2020 plan. So that was incorporated in our original guidance, the two new programs, Long Beach and then the second program location to be finalized in first half of 2021, those would be incremental. The timing of the Long Beach program will not affect revenue, meaningfully at all. It's a month and a half on, and it will be ramping, during that timeline.So minimal, revenue impact from a guidance perspective, the cost to implement the $850,000 I quoted is the operating expense side and that includes some modest amount of incremental marketing, advertising as well as obviously all the different work we have to do. And then the CapEx is $3.9 million. So our, within our operating expense, as we looked out, the rest of the year, we looked at our Q1 performance we felt like we had enough room in our profitability range and our OpEx range that we could accommodate that. And then, but from a CapEx perspective, our original guide was only 8 to 9.5. And that was discreet investments, so the $3.9 million is 100% additive essentially to that guidance.

Got it. And my last question is on the outlook for campuses. You talked about your real estate rationalization but can you talk about the potential for building new metro campuses and how your current balance sheet kind of factors into – your thoughts about that and the flexibility it might give you?

Well we're encouraged by the results in the first quarter and remain on track to achieve what we want to achieve in 2020. And, I think as I've mentioned to a number of our investors who've asked that sort of question along the way is that the turning of the business as we approach 2020 gives us the opportunity to think about geographic expansion beyond programs. We've got nothing to announce, or no specifics on any, on any new campuses, but we're now in a position where we can start thinking more expansively about our growth agenda and we'll share with you what we can when we can.

Okay, great. Thanks very much for taking my questions.

Sure. Thanks.

Thank you. [Operator Instructions] All right, this does conclude our question-and-answer session, so I would like to turn it the floor back over to Jerome Grant for any closing comments.

Thanks a lot. In closing, we're excited about what lies ahead for UTI and look forward to reporting on our progress and successes as the year progresses. In that regard Troy and I have been broadening our company's engagement with the investment community to multiple touch points throughout the year.As an example Troy and I will be presenting at the Sidoti Conference in New York City on March 26 and B Riley Conference in May in Beverly Hills. We're also planning investor road shows and site-based investor visits. We look forward to continuing our discussions across all of these events. Thank you everyone for joining us and have a great rest of your day.

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