Universal Technical Institute Inc (UTI) 2010 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Universal Technical Institute, Incorporated second quarter fiscal 2010 conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. (Operator Instructions).

As a reminder, today's conference call is being recorded. A replay of this call will be available for 60 days at www.uti.edu or alternatively, the call will be available through May 14, 2010 by dialing 877-344-7529 or 412-317-0088 and entering pass code 439553 followed by the pound sign.

At this time, I would like to turn the conference call over to Mr. Eugene Putnam, Chief Financial Officer of Universal Technical Institute. Please go ahead.

Thank you. Good afternoon, everybody, and thank you for joining us for our call today. Jim and I will discuss the results of our second quarter ended March 31, 2010, and then we'll open the call up for your questions.

The Company's earnings release was issued after the market closed today and is available on our 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'll refer you to today's news release for UTI's comments on that topic. The Safe Harbor statement 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 in the call, including the initial statements by management as well as answers to questions related in any way to any projection or forward-looking statements, are subject to this Safe Harbor.

At this time, I'll turn the call over to Kim McWaters, our Chief Executive Officer.

Thank you, Eugene. Good afternoon, ladies and gentlemen. This week, I'm proud to announce that UTI is celebrating its 45 anniversary. Over the past 4.5 decades, we have changed hundreds of thousands of lives by providing our students with an education, an on-ramp to their American dream.

We've worked very hard to earn the trust of some of the most respected brands in the automotive, diesel, motorcycle, marine and collision repair industries so that we could provide our graduates access to the best opportunities, so that we can change the perception of technical education for the better, and change the stereotype of the shade tree mechanic to that of a professional technician -- the best of the best.

I'm very proud of all that we've accomplished together at UTI and just wanted to take this moment to sincerely thank and congratulate all of our people. Team UTI, you are the best of the best.

I am pleased to report the results for the second quarter of fiscal 2010. Our net revenues were $105.6 million, up 19% year-over-year. Net income for the quarter was $6 million or $0.25 per diluted share compared to a loss of $80,000 last year for the same period. Our average student population for the quarter was 18,241, up 2,784 students or 18% from a year ago.

Now let's take a closer look at key operating trends, beginning with student recruitment. Student interest in UTI training programs remains healthy, as evidenced by mid-single digit year-over-year growth in both the number of student inquiries and applications made during the quarter. Further, as I mentioned earlier, not only did new students start to increase 22%, our student show rate improved over 400 basis points, which I will speak to in a moment.

To help drive growth in student inquiries from targeted areas, we increased our advertising spend during the quarter nearly $2 million to 8.5% of net revenues, up slightly compared to 8% of net revenues last year. Approximately $1.9 million was spent this quarter on local market advertising compared to $300,000 during the same quarter last year.

We increased our investment in local TV and Internet advertising to complement our national campaign and drive increased awareness for students who live within commuting distance of a campus. Our national television campaign remains an important element of our overall media strategy and is the fundamental driver of our successful TV to Web strategy.

Overall, the marketing investment this quarter resulted in nearly a 20% improvement in student inquiry volume over the previous quarter, coinciding nicely with the increased capacity across our admissions organization to handle a larger volume of student inquiries.

As we look forward to the second half of the year, I anticipate our marketing and advertising costs will be higher than last year, due to higher advertising costs overall and the local market support necessary for the Dallas campus launch. Although individual quarters may differ, I expect our advertising costs for the full year to approximate 7% to 8% of net revenues. This is slightly higher than what I referenced on our last call.

Student applications received during the quarter were up 7% year-over-year. This is solid progress, given the amount of change implemented during the latter part of fiscal '09 and beginning half of Q1. Since I discussed all of the changes last quarter, I won't go into all of the details again; but note that the changes were intended to drive an improved customer experience for our students, while improving efficiencies in our admissions organization over time.

With that said, we acknowledge the change would likely impact our ability to grow student applications initially and we did experience a year-over-year decline during our last quarter. Therefore, we are pleased to see the positive momentum gained this quarter.

As a reminder, when I speak of student applications, I'm referencing the number of applications received during that quarter without any specific start date assignment. So the increased applications received in this quarter are likely to drive our new student starts in subsequent quarters, as there is typically a multi-month lag time from the point a student makes application to the point he begins school.

Looking specifically at student start dates for this quarter, we had 12.3% more applications written to begin school during the quarter than we had last year for the second quarter. This fact, combined with an improved show rate of over 400 basis points, drove the 22% growth in new student starts for the quarter. This marks the eighth consecutive quarter of student start growth, and the show rates for the first half of this fiscal year are among the best the Company has ever recorded.

Switching gears for a moment and looking forward to the second half of the year, the good news is that we have already received 25% more applications from students to begin school during the third quarter than we received last year for the full quarter. This is a result of our teams trying to better balance our new student starts across the quarters, specifically addressing the capacity constraints for potential new student starts during the fourth quarter.

What this means is that we should see another quarter of double-digit new student start growth during the third quarter and a very full fourth quarter, which should be very similar to last year. Just as a quick reminder, historically, better than 40% of our new students start school during the fourth quarter -- more than double that of any other quarter during the year -- which is why it is impossible to grow new student starts during Q4 at the same rate we have in previous quarters.

Moving on to education and employment outcomes, given the challenging economic environment, I'm very proud of the work our campus teams have done from both an education and customer service standpoint to ensure our students get a high-quality educational experience. Our student retention rates remain consistently strong and stable across our campus network; and our student completion rates, also known as graduation rates, remain at 70% or better.

A primary focus operationally remains on the employment aspect of our student lifecycle, as this employment environment has been far more challenging than any other point in our Company history. Currently, we are running about 8 to 9 percentage points behind last year at this time. While certainly behind historical norms, this is a significant improvement from the beginning of the fiscal year, demonstrating that the team has been working very hard to assist our graduates and close the gap.

Further, our employment services teams indicate that there has been an increase in job openings and that perhaps some of the dust is starting to settle. There does appear to be certain programmatic and geographical differences in employment outcomes across the country, which we are clearly addressing.

To ensure we're doing all that is necessary to help our students secure employment following graduation, we are continuing to invest resources, as required, to provide the best level of service for both our students and our employers. During the first half of the year, we increased the size of our employment services team by roughly 10% and we'll add more team members during the second half of the year, due to the increasing number of graduates and market conditions. This equates to an increased investment of $1.2 million in the second half of fiscal '10.

While we expect the end markets we serve to continue to face challenging times for the foreseeable future, our teams are seeing some positive movement with new job openings, and remain optimistic that our employment rates overall will, in fact, be in the low to mid-80% range by the end of the fiscal year, as we've previously reported.

And with that, I would like to turn the call over to Eugene.

Eugene?

Thanks, Kim. As mentioned, net revenues for the second quarter were $105.6 million, up 19% compared to the prior year. The improvement over the period was primarily driven by an increase in average undergraduate student enrollments of 2,784 students, or about an 18% increase, as well as a decrease in need-based tuition discounts of $533,000. Additionally, it's worth noting that we now have approximately $14.2 million in revenue and interest that has not been recognized under our loan program, which I will discuss further in a few minutes.

During the quarter, we had $2.5 million in tuition revenue from our loan program that was earned but not accrued. That amounts to about 2.5% of revenue. Nevertheless, average revenue per student for the quarter increased four-tenths of percent to $5,791.

Operating income for the second quarter was $9.9 million compared to a loss of $200,000 in the same period last year. The improvement in operating income is due to an increase in the net revenues just discussed, partially offset by an increase in compensation costs. Operating margin for the second quarter increased to 9.4% from the second quarter of last year.

Compensation and benefit costs increased $3.9 million to $52.3 million. The increase is primarily attributable to the number of sales force representatives and an increase in the number of employees in Our Financial Aid and other student support departments.

I'm also pleased to report that even in this difficult economic environment, our bad debt expense decreased $99,000 for the second quarter from $1.6 million to $1.5 million. This decrease is due to improved operating efficiencies as a result of the investment made in hiring and training additional Financial Aid and future student advisors during 2009.

Net income for the quarter was $6 million, or $0.25 per diluted share as compared to a loss of $80,000 for the second quarter of last year. Through the first half of the year, net income was $15.3 million or $0.64 per share versus $0.09 in the first half of last year.

Our balance sheet continues to be extremely strong and liquid. We had cash, cash equivalents and investments of just under $99 million at March 31 compared with $85 million at September 30. We generated [$7.4 million] in cash flow from operations during the quarter compared with $3.4 million from operations during the three months ended March 31, 2009. We also continue to have no debt on our balance sheet, and during the quarter, we did not purchase any shares of our stock.

During the quarter, we did purchase $9.2 million in fixed assets. That was up from $4.4 million in the same period last year. $5.4 million of that $9.2 million that we purchased this quarter is related to the buildout of our Dallas campus and the development of our new curriculum, with the remainder primarily associated with various information technology projects, campus improvements, and the ongoing replacement of equipment related to student training.

Our internal loan program continues to meet its objective of enabling students who are qualified and desire to attend UTI, but for whatever reason, lack sufficient federal funding or third-party resources to still be able to enroll in school. As of March 31, we have committed to provide approximately $21.1 million under this program and we have approximately $19.6 million in loans outstanding. The average loan per student is now about $5,100. Since the inception of the program, approximately $14.2 million in revenue and interest has been earned but not recognized.

During the second quarter, we recorded $64,000 in revenue and interest from cash payments that were received, which was up from $18,000 the previous quarter. To date, we have collected $133,000 on this program. And while we certainly do not expect the entire deferred amount to eventually be collected, it is worth noting that the $14.2 million equates to approximately $0.35 per share.

In March 2010, the Healthcare and Education Affordability Reconciliation Act was signed into law. As you are probably aware, this law eliminated the Federal Family Education Loan Program effective on July 1, which prohibits any new FFELP loan with first disbursement dates after June 30. This requires all student loans to be provided under the new Federal Direct Loan Program. We've been actively modifying our systems and processes to accommodate this change, and are now completing all Financial Aid student loan packaging under this program.

Our new Dallas campus continues to be on track for a June opening. Through March 31, we have invested approximately $11.4 million on the building and the land purchase, building improvements and equipment, with approximately $2 million of that occurring during this past quarter. We anticipate investing in additional $6.7 million on building improvements and equipment in the coming three months.

During the three months ended March 31, we incurred approximately $1 million in operating expense related to the new campus. We anticipate we will incur approximately $7.5 million in operating expense for the full year 2010, and expect it to have a negative impact on earnings per share of approximately $0.09 this fiscal year.

The impact from Dallas for the quarter was $960,000 in expense and $1.6 million for the first six months of this year. This had a negative impact of $0.02 and $0.04 per share, respectively, for the past quarter and for the first six months. And as mentioned before, we anticipate this new campus will become profitable within nine to 15 months after opening.

And on a non-financial basis, the progress with the new campus is going well -- is also going well. We've achieved all of the critical milestones ahead of schedule. We have our Certificate of Occupancy and are in the final stages of equipping classrooms and labs. We've hired key members of the management team, most of whom have transferred from other campuses, and we continue to add to that team.

We have received our License to Operate from the Texas Workforce Commission and we have received our accreditation from ACCSC. And the really good news is that students are excited about the new location and our student applications are ahead of plan for the remainder of the fiscal year. If all continues to go according to plan, our 11th campus will open towards the end of June.

Similarly, our curriculum transformation is also making good progress. As a reminder, we are transforming our automotive and diesel curricula into a blended learning experience that combines several methodologies reflective of current industry training methods and standards, and incorporates both on-site classes and lab work with Web-based learning.

In addition to improving the overall educational experience for our students, the new curriculum will offer convenience and training flexibility while meeting industry standards. We're currently running an evaluation of the Transform Program at our Avondale campus, and we plan to launch the new curriculum at Dallas-Fort Worth when it opens later next month.

In summary, I was very pleased with the results of our second quarter. The number of students choosing to begin their education at UTI and the average number of students in school both increased by double digits. And importantly, we're ahead of our internal plans at the beginning of the year. Our show rates improved meaningfully for the second consecutive quarter. And while we still have tremendous seasonality in our quarterly starts, as Kim alluded to, we're doing a much better job of leveling starts throughout the year.

While much of the year remains, the results of the first six months raised my optimism of achieving our goal of full-year operating margins, excluding the new Dallas campus, being in double digits -- which if we achieve that, should continue to produce excellent year-over-year growth in our financial results, as well as position us extremely well for an even better year in 2011.

And with that, I think we're now ready to open the lines for questions. Jamie?

(Operator Instructions). Kevin Dougherty, Bank Of America Merrill Lynch.

I guess, the first one, just kind of looking out, how are you thinking about the impact of an improving economy on your enrollment trends as well as your marketing costs? Clearly, the business is performing quite strongly right now. I'm just trying to think -- does that become somewhat of a headwind on those measurements as we look out to 2011?

Good question. And as we've talked about, I think in our last conference, we referenced unemployment rates being at extremely high levels for our student demographics, the young male. And it is -- continues to trend much higher than the general population. And we would expect that to continue, given the types of jobs that these people normally seek without having either skill-based training or further education.

So, while we have tried to apply lessons over the last couple of years with the last cycle, we do think that there's -- unfortunately, for some in the country, that there's still a long road ahead, and that we're applying the lessons we've learned, especially in the markets where we have campuses, by targeting our advertising in those local areas, and giving more attention to the population that would not be distracted with a short-term job opportunity.

And Eugene mentioned the new Dallas campus opening as well as the curriculum introduction -- both of those are to offer convenience and flexibility for students who may have the opportunity to take a job in the future while going to or pursuing a UTI education.

So yes, we expect there's going to be some impact, but we don't see it in the near future, and we're adjusting our business models to anticipate any of those changes in the future.

Okay. Thanks, Kim. And then just as a follow-up on pricing, could you just talk about the outlook there? How much of a driver do you think that will be to the margin outlook? And if you can just comment on revenue per student over the rest of the year.

Typically, I think we've said before that we have about 2% to 3% from a tuition increase built in and/or expected. We had one in the spring and we'll have another in the fall, somewhere in the 2%, 2.5% range. Most of that has been offset by the student loan, the First Century Loan Program. So I would expect there to be probably similar outcomes that we saw this quarter in terms of a revenue per student standpoint.

Okay. Great. Thank you.

Corey Greendale, First Analysis.

I just had a couple of quick clarifying questions. Kim, in your remarks, you said something about double-digit start growth again in Q3, and then you said something about Q4 being similar to last year. Can you just clarify -- did you mean a similar growth rate or the absolute number? Starts similar to Q4 or what exactly did you mean?

Good question. Sorry for the confusion. We would expect the size, the absolute number to be very similar to last year. So not growing at the same rate and/or especially given the increases we've seen in the previous quarters. Just wanted to make certain that people understood that fourth quarter, we would not see double-digit start growth rate like we experienced in this quarter.

Okay, that helps. And Eugene, when you're talking about the Dallas campus, I think -- correct me if I'm getting this wrong -- you said that you now expect between $0.09 dilutive for the full year?

Yes.

So I think in the past, you've said $0.11. Is that just some expense getting pushed back? Or is something actually coming in lower than you had expected in terms of the expense?

The latter.

Okay. But nevertheless, the timing to breakeven shouldn't have changed, you said --?

No, the timing is still within that nine to 15-month timeframe.

Okay. And if I could just sneak one more in -- you spent some time on the last call, Kim, talking about the openings in the field sales force. Are there still any of those? And can you talk about your hiring plans for the next couple of quarters?

Sure. On our last call, we just talked about the territory changes where we had reduced our total field coverage by 18 territories. They were the underperforming territories; for the most part, those positions are full, as the same to be true on the campus side. This time of year, as high school seasons come to a close, we do normally see some transition and turnover, and we would be replacing those in the latter summer, early fall months.

Nothing out of the ordinary. There are not significant plans to increase the size of the field organization. And I would expect that you might see some increases as we near the end of fiscal '10 and go into 2011 on the campus side.

Great, thanks and nice job on the quarter.

Kelly Flynn, Credit Suisse.

I think the first question kind of touched on this, but I was hoping for a bit more detail on your comments about the advertising costs that you're seeing. Some other companies have talked about spot rates going up. Can you just talk about what you're seeing there and what, if any, aspect of it may relate to the better economy and its impact on the add rates?

I'd say, as other companies have reported, we are seeing the same thing, specifically with television advertising, the traditional 30, 60-second spots. We're seeing that across the country and I'd describe it as kind of a return to pre-2009 conditions.

And so, it's not something that we haven't dealt with in the past. I think that we'll continue to look for the best available opportunities on both a national and local level. As I said in the prepared remarks, local advertising does tend to be more expensive. And we have continued to ramp up our investment in those local markets. The benefit of that, although heavier costs on the front end, is that we do see better student outcomes from those students who live within close proximity to a campus.

So we believe that the additional advertising investment is worth it, although the costs are higher on the front end. But, as everybody else has reported, we're seeing the same thing. So I don't know what more color to add there.

Okay, that's great. Can you speak to your graduation or completion rates and how you define them?

Yes. Our completion rates typically are looking at a cohort of students who start during a given period and following them through the course of their education to the point that they graduate. So, we didn't give specific times on the call, but I can tell you in terms of every period that we have reported and looking back over the past several years, they've stayed very constant at 70%, 72%. So it's -- we're not seeing any sort of fluctuations with those rates.

Okay. And just to clarify, you start counting right when they start? You don't wait until they've completed kind of a first class or anything like that?

No. It's when they begin school that starts the count towards graduation. They're part of the beginning number.

Okay, perfect. Thanks a lot.

Trace Urdan, Signal Hill.

Kim, you spoke about the improving share rates and, in fact, I think, you said they were record-setting. And I'm wondering if you can just describe a little bit more what you think is behind that? Is that something that's going on external or is it -- you think it's directly a function of your approach to the students?

It's a good question, and while we think that, certainly, we have benefited from the general economy in terms of students going back to school and others have commented, we have done a lot over the last couple of years to improve our level of service to students who make application, and then show the school that we've, hopefully, been giving all of you insight into over the last couple of years.

I can't say that what we have seen is that with focus on students within closer proximity, balancing a young adult with a high school student mix has certainly helped. And then all of the efforts that we've put forth on helping the students understand their Financial Aid package and ensuring that they have the resources to finance their education has made a difference.

So do you feel reasonably confident that you're going to be able to hang on to these show rates, even if the economy starts to improve? Or how do you handicap that?

Well, you know, I do think that, in fairness, when the economy was working against us, we did see some pressure on the show rates. And so I don't think it would be fair to say that we wouldn't see that; but hopefully, over the last couple of years, we have learned more about how to better serve our student demographic, and are targeting those students who have the ability to benefit from a UTI education.

And again, as I mentioned earlier, with bringing the education to the students, such as the Dallas market, and changing the curriculum so that it is more flexible, allow students, especially those living within close proximity, to work while going to school. And that's not something that has been a very convenient or true attribute for UTI in the past. Our schedules have not really promoted or permitted that. So I think that's something that will help us as the cycle does begin to change; but we'll have to see.

And maybe this is obvious, but do you see that as a permanent change in your profile? I mean, will you ever go back to the sort of out of area students traveling to come to UTI?

I think the important thing here is that what we're trying to do is certainly make certain that we pay attention to the local markets. Because historically, our model with larger destination campuses was pretty dependent upon the student who was willing to relocate. And because we were successful in doing that, we did not necessarily have to put in the investment in the local market like we're doing today.

And what we found is that there's value in both. It just should not be skewed too far to the remote students that have to travel great distances to come to UTI. And I think the results that you've seen over the last couple of years is that we are trying to find that right balance for students, and what you're seeing in the results reflects that.

Thank you.

Gary Bisbee, Barclays Capital.

I guess, just following up on the question on the show rates -- if, you said in the first half, they're near sort of all-time high levels you've seen, once we get into next fiscal year and start to lap that, even if they stay at that level, what are the prospects for application growth accelerating? Or if we think about it, it's sort of a longer-term thought process around starts maybe being somewhere like what the applications has been, mid to high-single digits over the last few quarters.

Well, I think, certainly, there will be a point where we don't see continued improvement there and it will have to come from the contract growth. And that's -- we're working on that and believe that there's opportunity within our existing admissions teams to improve efficiencies. We've made a number of those changes that we mentioned in the first quarter of this year and the latter part of Q4 of fiscal '09, to address that; to create greater efficiency across both our field campus, so young students, adult students, as well as our military division.

And I would think that high-single/low-digit growth is achievable, based on everything that we're seeing and knowing that there's still capacity within our existing admissions infrastructure.

And then, I guess a follow-up -- with the 71% or 72% capacity utilization you're at right now, what's the range across campuses? Obviously, opening a new one will bring new capacity, but do you have a few that have gotten to a much higher level, that they're essentially nearing being full? Or are most of them around that 70's percent somewhere?

Gary, it's Eugene. The majority of them are around that number. You have a couple of outliers on both sides; specifically, Orlando is very full and our motorcycle campus here is very full. But the majority of them are, give or take, 5 basis points -- or, I'm sorry, 5 percentage points around that consolidated number. And you have one that's a little low -- on the low end.

And if I could just sneak one more question in. I understand all the reasons you're focusing more on local in the last year or so. Is this going to present a problem with placements, if a lot of people want to stay local when they get out, just in terms of you're going to need a lot more jobs in those markets and maybe that puts downward pressure? Or are you pretty comfortable that if a lot bigger percentage are coming local, you'll get them jobs local? Thanks.

That's a very good question and something we continue to evaluate. The end markets or the employee opportunity is what drives our full business model. So before we make any decision to expand, whether it would be into a new market or penetration within a certain market, we first have to understand what the employment demand is.

And so, in the areas where we have increased our advertising and student recruitment programs, that is because there is demand in those areas. And you're right, students do not want to relocate to attend -- or, not to attend, but to get employment. They want to go back to where they came from. So if they come from within the local area of a campus, where a campus is located, it is 90 plus percent certain that they will stay there for employment. And we need to make certain that that equation is well-balanced before the recruitment process begins.

Okay, thank you.

Jeff Silber, BMO Capital Markets.

I just want to clarify one thing, I think, Kim, you may have said in your remarks. In terms of applications for current quarter starts, that was running about 25% over last year, is that correct?

That was looking forward at the third quarter.

Right. So the current quarter, the one we're in right now?

That was 12.3%.

12.3%. I'm sorry; I misread that. Okay, I appreciate that.

And then also, when you talked about placement rates being down about 8% to 9%, what were they last year, just so we get an order of magnitude?

I'd say they've been -- they, last year, were running in the mid to high 80s. So you'll see some campuses in the high 70s. You'll see some at 90%; just across the board, they're down. But we still have the remainder of this year to improve that, which is why I continue to talk about where we expected to be for the full year, given the progress that we see against students graduating in the more recent quarters.

Okay. And then take that to the next level. I know we talked last quarter about the proposed gainful employment regulations. Have you or anybody else at your Company have any discussions with the folks at the Department of Education or some of your advisors, just to get some indication about what they're thinking?

I'd say that we're getting information that's probably similar to that which has been shared by the companies that have already reported. It doesn't -- you know, it's hard to get the right answer or the answer that we're all looking for, because it's in motion.

And so, depending on the day, what has been released is the type of information that we're getting, with maybe a little bit of additional insight before it hits. But nothing that is drastically different from what you have access to and are reading.

Okay. Appreciate the color very much.

Jeff, it's Eugene. There was a little confusion there when we started talking about quarters, so let me just clarify.

What Kim was alluding to was we had 12.3% more applications for the second quarter, okay, than we have last year. So that, combined with the higher show rate, is what drove the 22% start growth. She also alluded to having 25% more applications right now scheduled to start than we did for the third quarter last year.

All right, great. And just following up on that (multiple speakers) -- thank you, Eugene for clarifying that. So, assuming that show rates have continued to improve, is there any reason that start growth should be -- not be higher than that 25%?

Well, that's how the math works.

Okay. Just asking. All right, thanks so much.

(Operator Instructions). Jason Anderson, Stifel Nicolaus.

I'm here for Bob and Jerry. As you are reaching the higher utilization levels and closer to full utilization, even in some campuses as you noted there, what are your longer-term growth plans regarding capacity additions/seat expansion? And also recognizing that the hybrid plan or the hybrid approach should obviously play a role in that. But above and beyond that, could you comment on anything there?

Yes, I would say that certainly the example of Dallas, we believe that there are other markets where we can expand with a similar model. As we've said on previous calls, we plan to prove this one out.

With that said, there's opportunity at our existing sites if we needed to open up an additional session, where we could get more creative at our existing facilities. We're not to that point yet, but should the opportunity arise, it's something that we can certainly take advantage of.

Okay. And also, separately from that, on rep productivity, could you give us any comments on how that's trending and whether it's above or below your expectations? And that -- between new and older, more experienced reps -- sales reps.

A couple of comments. One is just to talk to the high school organizations, this is the group that we removed the 18 territories. We did see improved efficiencies on an individual rep basis for this group; so I think that is positive.

We are still down somewhat from an efficiency standpoint with our campus or young adult recruiters. And I attribute that again to a lot of the changes that we have introduced, and the fact that we hired 32 new people at the beginning of the year. So I don't have the specifics with me in terms of seasoned raps versus new reps or how that might be dragging it down; I would just say the efficiency levels are not what we expect for the full year and recognize that these things are in a ramp mode.

Great. Thanks. That's all I had.

And we have one final question. This comes from Bruno Yang from Annalex.

I wanted to make sure I understand one of the previous comments you made. Did you say that the absolute number of starts in the fourth quarter you expected to be flat year-over-year?

We would expect it to be similar to our fourth quarter last year, yes.

So that would imply -- said differently, that start growth should be around zero? Am I understanding that correctly?

Yes, it could be a little less or a little more. It's still a ways out to comment. I just wanted to make certain that people were not expecting 20-plus percent growth in the fourth quarter from a modeling standpoint, as that is the largest quarter and, typically, is very full, given the 50 plus percent of our population is high school starts and that's the quarter that they start in.

All right. Thank you very much.

Bruno, just to add to that, I think what Kim was alluding to is what we want to make sure people are aware of, as we talked about at the beginning of the year and gave our guidance of full-year double-digit starts. The concern is, people see us reporting 20% increases quarter-on-quarter, and somebody just did the math and suggested something along the lines of 25% in the third quarter, which we did take issue with.

And just making sure people are aware that we do have a set limit of capacity that we can actually start each quarter, and you can't just extrapolate those growth numbers -- because part of what we've been doing is trying to even that load out throughout the quarter and accelerate some of those that might otherwise start in the fourth quarter, knowing that there is not a whole lot you can do to accelerate high school students that are going to start in the fourth quarter.

So, hence the ability and what we've been attempting to do for the first three quarters of leveling out those starts. And that's what reflects. We just want to make sure nobody tries to extrapolate that number in the fourth quarter.

I got you. I just thought that the magnitude deceleration from the third quarter of 20 plus to zero -- close to zero in the fourth quarter was a little bit large; but your explanation makes sense. Thank you very much.

Yes, and that's not to suggest a slowing going into 2011, either. That's a fourth quarter phenomenon with the fact that last year, we had almost two-thirds of our starts in that fourth quarter. That's something that just needs to logistically be leveled out a little bit.

Thank you.

And we do have one additional question. This comes from Kelly Flynn from Credit Suisse.

Thanks. I don't know if you'll answer this, but I thought I'd give it a try. Just given the starts growth color and the expenses related to the new campuses, which I know you mentioned last quarter, I just want to see -- can you give any comment on the consensus for the full year? Whether or not you think it's ballpark reasonable?

What are you using as the consensus?

Oh, I have $1.19, but that's -- I'm not sure that's completely current.

I think that's pretty close to the consensus. And I think our comments that we made last quarter about being able to achieve that, I wouldn't change any of that commentary at this point.

Okay, great. Thanks a lot. Appreciate that.

And at this time, I'm showing no additional questions.

All right. Thank you very much for your questions. We appreciate your time and interest in Universal Technical Institute, and we look forward to updating you on our third quarter earnings call, which is scheduled for Tuesday, August 3. Have a great evening.