Universal Technical Institute Inc · NYSE:UTI
Universal Technical Institute — Q3 2020 Earnings Presentation
47 slides from Universal Technical Institute's earnings presentation, Aug 6, 2020
Slide 1: Universal Technical Institute Investor Presentation
Universal Technical Institute Investor Presentation August 6, 2020
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to the safe harbor created by such Act. These statements are based on our management’s current beliefs, expectations and assump
Slide 3: Leading Provider of Skilled Transportation Technicians
Leading Provider of Skilled Transportation Technicians 55 _________________ YEARS 11K+ _________________ STUDENTS 35+ _________________ MANUFACTURING 220K+ _________________ GRADUATES SINCE 1965 BRAND PARTNERS 4,600+ _________________ INCENTIVE & TUITION 86% _________________ EMPLOYMENT RATE1 REIMBU
Slide 4: State-of-the-Industry Technology and Training
State-of-the-Industry Technology and Training 4
Slide 5: Impressive Training Facilities Nationwide
Impressive Training Facilities Nationwide Notes: Excludes the Norwood, MA campus which was closed on July 31, 2020; Orlando campus consists of the 3 buildings shown 5
Slide 6: Investment Thesis Highlights
Investment Thesis Highlights Strengthened management team well down the path of executing Company transformation plan with strong results Attractive student value proposition which includes blended learning model Evolved strategy fueling EBITDA and student population growth Optimized for any macro e
Slide 7: UTI's COVID-19 Response
UTI’s COVID-19 Response Health and safety of students and employees a top priority, rapid and innovative solutions implemented to overcome the many challenges we have faced STUDENTS EMPLOYEES • CDC protocols for safety • CDC protocols for safety • Developed and implemented interactive, online curric
Slide 8: UTI CARES Funds Uses
UTI CARES Funds Uses UTI is using its Higher Education Emergency Relief Fund (HEERF) allocation to support students and provide them a safe, quality education. CARES Act HEERF funding is helping our students stay in school, continue their educations and move toward graduation and career success in t
Slide 9: Strategic Initiatives Delivered Significant Achievements
Strategic Initiatives Delivered Significant Achievements THE PRESENT Improved Results Student Starts and Population: • First average student growth in FY19 since FY10 • New student starts1 in FY19, highest since FY15: • Up 5 consecutive qtrs through FYQ42019 Strategic Initiatives • 11.5% growth YOY
Slide 10: Transformation Yielded Strong Improvements
Transformation Yielded Strong Improvements ($ in millions, except for student data) Revenue Adj Op Income(Loss) Adjusted EBITDA1 $12.5 $28.0 $336.7 $331.5 $17.0 $(1.7) $317.0 $(25.7) $(7.8) FY 2018 FY 2019 TTM* FY 2018 FY 2019 TTM* FY 2018 FY 2019 TTM* Adjusted Free Cash Flow2 Adjusted Student Start
Slide 11: UTI Student Lifecycle
UTI Student Lifecycle ~255k Media Workable Leads ~25k Enrollments ~12k ~8k Starts Graduates* ~7k Employed in Field *Includes Pro-forma adjustment for graduates delayed in Q3 FY20 due to COVID-19 Note: All data is trailing twelve months as of June 30, 2020
Slide 12: Evolving Strategy to Better Reach and Engage Students
Evolving Strategy to Better Reach and Engage Students HIGH SCHOOL GRADS VETERANS ADULT LEARNERS 52% 9% 39% 1 1 1 UP 15.6% IN FY19 UP 7.7% IN FY19 UP 7.4% IN FY19 Added reps and enhanced Assisting veterans, working Optimizing traditional and marketing to better represent to regain access and digital
Slide 13: Metro Campus Investments Deliver Results
Metro Campus Investments Deliver Results Adapting to changing student expectations DALLAS, TX 2010 LONG BEACH, CA 2015 BLOOMFIELD, NJ 2018 Campus Profile • ~100,000 SF • IRR 35%+ • Average student capacity of at least 750 • Accretive to earnings in 18 months • ~$10-$15M capital investment • Cumulati
Slide 14: Differentiated Programs Driving Student Starts
Differentiated Programs Driving Student Starts WELDING CNC MACHINING • High demand for technicians • 36-week program in Rancho Cucamonga, CA, Avondale, • High demand for technicians AZ, and Dallas, TX, all running at or near capacity • 36-week program at NASCAR Technical Institute • FY20 launched in
Slide 15: Optimizing Real Estate Footprint for Efficiency
Optimizing Real Estate Footprint for Efficiency Completed In Process Evaluation BLOOMFIELD, NJ* 1 Enhance utilization of LONG BEACH, CA* Welding FY20 DALLAS, TX* Welding FY19 existing space with RANCHO Welding FY17, CUCAMONGA, CA Optimize SF FY18 new programs MOORESVILLE, NC CNC FY17 Programs, Optim
Slide 16: Demand for Auto/Diesel Technicians Far Exceeds Industry Supply
Demand for Auto/Diesel Technicians Far Exceeds Industry Supply 1.1M+ 118,000 ___________________ TECHNICIAN JOB OPENINGS BY 20283 50,000 260M+ ____________________ VEHICLES IN THE 1.3B+ _________________ VEHICLES ON THE UNITED STATES2 ROAD WORLDWIDE1 Auto/Diesel/CRRT technicians 2018 Graduates Annua
Slide 17: More Market Share than Three Closest Competitors
More Market Share than Three Closest Competitors 13% 5% UTI 2% graduates more 1% Lincoln Tech 2% UNOH (NFP) Auto/Diesel techs Wyotech (NFP) 59% than any other 7% Other not-for-profit school in the country. Other for-profit 4-year colleges Community colleges 11% Source: IPEDS, provisional 2017-2018 c
Slide 18: Delivering Higher 10-year Median Earnings
Delivering Higher 10-year Median Earnings $45,200 $45,488 47% Increase $30,830 1 Community colleges UTI Liberal arts colleges Source: College Scorecard Data. 10-year median earnings are calculated by determining the median earnings of former students, who received federal financial aid, at 10 years
Slide 19: Well Positioned National Campus Network
Well Positioned National Campus Network Available capacity to increase students plus additional market opportunities to add rapidly accretive campuses • 12 campuses Welding Program Expansion: • 8 states • Houston, TX (launched Q3’20) • ~1.85M SF • Long Beach (LA), CA (launched Q4’20) • Located in hi
Slide 20: Industry Partnerships that Deliver Value
Industry Partnerships that Deliver Value 86% graduate industry employment rate1 PARTNERS STUDENTS UTI • Efficient hiring source • Pipeline to jobs • Current technology and tools • Lowers costs • Better jobs and higher • Increased marketing impact starting wages2 • Techs who are ready to work • Lower
Slide 21: Q3 FY20 Results Show Timing Impacts of COVID-19
Q3 FY20 Results Show Timing Impacts of COVID-19 First half FY20 results showed continued momentum First Half YoY Q3 FY20 YoY Q3 $ Millions FY20 First Half Actuals Change Actuals Change Student start growth (excluding Norwood, 3,687 7.1% 1,824 8.4% MA) Average population 10,923 0.2% 9,068 (8.3)% Reve
Slide 22: Pre-COVID Quarterly Performance Trends Showed Continued Positive Momentum
Pre-COVID Quarterly Performance Trends Showed Continued Positive Momentum ($ in millions, except 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. for student data) 6/30/20 3/31/20 12/31/19 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 6/30/18 Adjusted new student starts1 1,824 2,093 1,594 6
Slide 23: Potential Capital Deployment Opportunities to Drive Long Term Growth
Potential Capital Deployment Opportunities to Drive the Company’s Long Term Growth Management and Board will prudently allocate capital across defined categories each representing estimated 25%+ IRR opportunities NEW PROGRAM CAMPUSES EXPANSIONS INORGANIC BUSINESS MODEL GROWTH EXTENSIONS 23
Slide 24: Industry Leader with a Strong Value Proposition for Students and Shareholders
Industry Leader with a Strong Value Proposition for Students and Shareholders 24
Slide 25: Appendix
UNIVERSAL ] TECHNICAL | INSTITUTE APPENDIX
Slide 26: Talented Management Team with New Leadership
Talented Management Team with New Leadership Jerome Grant, CEO Troy Anderson, EVP & CFO Sherrell Smith, EVP Campus Operations & Services Eric Severson, Lori Smith, Todd Hitchcock, SVP Chief Strategy SVP Admissions SVP Chief Information Officer & Transformation Officer Chris Kevane, Sonia Mason, SVP
Slide 27: Highly Qualified Board of Directors
Highly Qualified Board of Directors Robert DeVincenzi David Blaszkiewicz George Brochick Non-Executive Chairman, President and Chief Executive Vice Universal Technical Institute; Executive Officer, President of Strategic Principal, Lupine Ventures; Invest Detroit Development, Penske Former President
Slide 28: Prior Recessionary Impact – Financial Data
Prior Recessionary Impact – Financial Data 2008 – 2011 Revenue EBITDA Margin % $475,000 17.0% 16.0% $450,000 15.0% $425,000 14.0% Annual Revenue ($000s) $400,000 13.0% EBITDA Margin % $375,000 12.0% $350,000 11.0% 10.0% $325,000 9.0% $300,000 8.0% $275,000 7.0% $250,000 6.0% 2008 2009 2010 2011 Sour
Slide 29: Prior Recessionary Impact – Student Data
Prior Recessionary Impact – Student Data 2008 – 2011 Student Starts Students at Period End Avg # Students Unemployment Rate 21,500 19.0% 20,750 17.0% 20,000 Male 18-24 Annual Unemployment Rate 19,250 15.0% 18,500 13.0% Students 17,750 11.0% 17,000 16,250 9.0% 15,500 7.0% 14,750 14,000 5.0% 2008 2009
Slide 30: Statements of Operations Trend
Statements of Operations Trend ($ in thousands, except per share amounts) 9 Mos. 3 Mos. 3 Mos. 3 Mos. 12 Mos. 3 Mos. 9 Mos. 3 Mos. 3 Mos. 3 Mos. 6/30/20 6/30/20 3/31/20 12/31/19 9/30/19 9/30/19 6/30/19 6/30/19 3/31/19 12/31/18 Revenues $224,434 $54,483 $82,717 $87,234 $331,504 $87,666 $243,838 $79,0
Slide 31: Balance Sheet and Cash Flow Summary
Balance Sheet and Cash Flow Summary ($ in thousands) At: 6/30/20 9/30/19 3 Mos. 9 Mos. 3 Mos. 9 Mos. 6/30/20 6/30/20 6/30/19 6/30/19 Cash & cash equivalents $ 59,956 $ 65,442 Net cash provided by (used in) Restricted cash* 19,205 15,113 (21,014) (10,117) (9,932) (7,124) operating activities Held-to-
Slide 32: Impact of the New Leasing Standard (ASC 842)
Impact of the New Leasing Standard (ASC 842) Summary of the Financial Statement Impact(1) • UTI adopted the new standard effective 10/1/19 Opening Balance Sheet Impact • Key impacts $M Net Assets Net Liabilities Net Equity • UTI’s 2020 assets increased for the addition of Additions for $148.6 $163.0
Slide 33: COVID Aid, Relief, and Economic Security (CARES) Act
COVID 19 Aid, Relief, and Economic Security (CARES) Act HIGHER EDUCATION EMERGENCY RELIEF FUNDS (HEERF) • The HEERF funding allocation by the Department of Education (ED) is as follows: Minimum Allocation to be Awarded for Emergency School Total Allocation Financial Aid to Students Remaining Funds U
Slide 34: COVID Aid, Relief, and Economic Security (CARES) Act
COVID 19 Aid, Relief, and Economic Security (CARES) Act Tax Provisions and Impacts NOL Utilization Rules Impact to UTI • For the 9 months ended June 30, 2020, we have recorded an income tax benefit of $11.3M related to NOL • $4.2M related to 2018 fiscal year losses that were carried back to 2017 • $
Slide 35: Exploring Additional Opportunities For Long-Term Growth: New Campuses
Exploring Additional Opportunities For Long-Term Growth: New Campuses NEW CAMPUSES − Metro Campus & Micro Metro Campus expansion strategy based on primary and secondary research aligned to Designated Market Areas (DMA) − Typical full Metro campus capital Investment range from $10M to $15M, Micro wil
Slide 36: Exploring Additional Opportunities For Long-Term Growth: Program Expansion
Exploring Additional Opportunities For Long-Term Growth: Program Expansion NEW PROGRAMS AT EXISTING CAMPUSES − Leverage existing campus footprint to add new, high demand programs − Continued expansion in welding through the introduction to additional campuses each year which represent high ROI inves
Slide 37: Exploring Additional Opportunities For Long-Term Growth: Inorganic Growth
Exploring Additional Opportunities For Long-Term Growth: Inorganic Growth INORGANIC GROWTH − Acquisition pipeline in development and expanding − Initial targets under review would be immediately accretive − Targets could range from new regions, program expansion, scale opportunities and business div
Slide 38: Exploring Additional Opportunities For Long-Term Growth: Business Model Extensions
Exploring Additional Opportunities For Long-Term Growth: Business Model Extensions BUSINESS MODEL EXTENSIONS − Multiple strategic initiatives have been identified that would allow for a diversification strategy − Diversification strategies designed to reduce the reliance Title IV as a funding source
Slide 39: Metro Campuses Deliver Positive Financial Results
Metro Campuses Deliver Positive Financial Results Long Beach, CA Bloomfield, NJ Pro-forma Y1 Y2 Y3 Y4 Y5 Y1 Y2 Y3 Y4 Y5 Financials FY15A FY16A FY17A FY18A FY19A FY18A FY19A FY20P FY21P FY22P Revenue $0.7 $12.2 $18.3 $20.9 $22.4 $0.6 $10.9 $17.7 $19.2 $19.7 EBITDA contribution (3.6) 2.9 9.0 11.7 13.3
Slide 40: Long History of Entering and Executing in New Markets
Long History of Entering and Executing in New Markets PHILADELPHIA, PA MARKET ENTRY(a) DALLAS/FORT WORTH, TX MARKET ENTRY(b) 1200 650 600 1000 550 800 500 Completions Completions 450 600 400 400 350 300 200 250 0 200 2016-Prelim 2010 2011 2012 2013 2014 2015 2016-Prelim 2005 2006 2007 2008 2009 2010
Slide 41: Illustrative Welding Financials – Avondale, AZ
Illustrative Welding Financials – Avondale, AZ Pro-forma financials ($m) FY17A FY18A FY19A FY20P FY21P Revenue $0.0 $1.2 $3.4 $3.2 $3.1 EBITDA contribution(b) (0.1) 0.5 2.4 2.2 2.1 Capital expenditures(c) (0.4) (1.1) (0.0) 0.0 0.0 Pre-tax cash flow(a) $(0.5) $(0.6) $2.4 $2.2 $2.1 Perpetuity IRR 80%+
Slide 42: Use of Non-GAAP Financial Information
Use of Non-GAAP Financial Information This presentation contains non-GAAP (Generally Accepted Accounting Principles) financial measures, which are intended to supplement, but not substitute for, the most directly comparable GAAP measures. Management chooses to disclose to investors these non-GAAP fi
Slide 43: Adjusted Operating Income (Loss) Trend
Adjusted Operating Income (Loss) Trend ($ in thousands) 9 Mos. 3 Mos. 3 Mos. 3 Mos. 12 Mos. 3 Mos. 9 Mos. 3 Mos. 3 Mos. 3 Mos. 6/30/20 6/30/20 3/31/20 12/31/19 9/30/19 9/30/19 6/30/19 6/30/19 3/31/19 12/31/18 Income (loss) from operations, as $(10,024) $(13,779) $(499) $4,254 $(7,802) $5,438 $(13,24
Slide 44: EBITDA Reconciliation Trend
EBITDA Reconciliation Trend ($ in thousands) 9 Mos. 3 Mos. 3 Mos. 3 Mos. 12 Mos. 3 Mos. 9 Mos. 3 Mos. 3 Mos. 3 Mos. 6/30/20 6/30/20 3/31/20 12/31/19 9/30/19 9/30/19 6/30/19 6/30/19 3/31/19 12/31/18 Net income (loss), as reported $1,558 $(13,268) $10,142 $4,684 $(7,868) $5,477 $(13,345) $(365) $(5,26
Slide 45: Adjusted EBITDA Reconciliation Trend
Adjusted EBITDA Reconciliation Trend ($ in thousands) 9 Mos. 3 Mos. 3 Mos. 3 Mos. 12 Mos. 3 Mos. 9 Mos. 3 Mos. 3 Mos. 3 Mos. 6/30/20 6/30/20 3/31/20 12/31/19 9/30/19 9/30/19 6/30/19 6/30/19 3/31/19 12/31/18 EBITDA $(206) $(10,204) $2,224 $7,774 $11,355 $10,153 $1,202 $4,436 $(319) $(2,915) Non-recur
Slide 46: Adjusted Free Cash Flow Trend
Adjusted Free Cash Flow Trend ($ in thousands) 3 Mos. 3 Mos. 9 Mos. 9 Mos. 12 Mos. 12 Mos. 3 Mos. 6/30/20 6/30/19 6/30/20 6/30/19 9/30/19 9/30/18 12/31/18 Cash flow provided by (used in) operating activities, as $ (21,014) $(9,932) $ (10,117) $ (7,124) $ 21,746 $ (13,353) $ 4,410 reported Purchase o
Slide 47: Universal Technical Institute
UNIVERSAL TECHNICAL INSTITUTE
Universal Technical Institute — Q3 2020 Earnings Presentation on 6ix