Universal Technical Institute Inc · NYSE:UTI
Universal Technical Institute — Investor Presentation (February 2018)
35 slides from Universal Technical Institute's investor presentation, Feb 8, 2018
Slide 1: Investor Presentation
Investor Presentation Kim McWaters, President & CEO Bryce Peterson, CFO February 8, 2018
Slide 2: Safe harbor
2 This presentation may contain forward-looking statements regarding events or future financial performance. These statements are only predictions and the actual events or results may differ materially. For important factors that could cause actual results to differ materially from those contained i
Slide 3: Nation's leading provider of skilled transportation technicians
3 • 50+ years of training technicians • 200,000+ graduates • 30+ leading manufacturer partners - BMW, Cummins, Ford, Harley-Davidson • 86% graduate employment rate 1 • $324.3 million in revenue in fiscal 2017 • $93.3 million in cash & equivalents/investments 2 • NYSE: UTI Nation’s leading provider o
Slide 4: A national campus network with capacity for expansion
4 A national campus network with capacity for expansion Smaller campus format ESTABLISHED FOOTPRINT • 12 campuses in eight states • 2.32 million campus square feet *Bloomfield, NJ campus is under construction. Anticipated opening of Fall 2018. Pursuing necessary approvals.
Slide 5: Impressive training facilities
5 Impressive training facilities Dallas/Fort Worth campus
Slide 6: State-of-the-industry vehicles and technology
6 State-of-the-industry vehicles and technology Long Beach, Calif. campus
Slide 7: More market share than our three closest competitors combined
14% 6% 2% 1% 9% 1% 7% 60% UTI Lincoln Tech UNOH (NFP) WyoTech (NFP) Other for-profit Other not-for-profit 4-year colleges Community colleges 7 Source: IPEDS, provisional 2016 completions data. Based on first major, completions for bachelor's degree, associate's degree, and certificates below the bac
Slide 8: Partnerships with the world's leading manufacturers
8 Partnerships with the world’s leading manufacturers 86% graduate employment rate* *UTI employment rate for 2016 graduates who were employed within one year of graduation was 86%. See UTI’s 10-K for additional information. For 2016, we had approximately 9,200 total graduates, of which approximately
Slide 9: Delivering higher 10-year median earnings
$25,000 $35,000 $45,000 Community colleges UTI Liberal arts colleges $29,878 $43,700 $43,138 Delivering higher 10-year median earnings Source: The College Scorecard. See Appendix for details and calculation methodology. 46% increase 9
Slide 10: Demand for auto/diesel technicians far exceeds supply
10 Demand for auto/diesel technicians far exceeds supply 100,000 new auto/diesel technicians needed every year through 2026 SOURCES: BLS Employment Outlook Summary, October 2017. Includes new job growth and replacements. IPEDS, provisional 2016 completions data. Based on first major, completions for
Slide 11: Adapting to changing student expectations
11 Adapting to changing student expectations 53% of incoming college freshman now enroll within 100 miles of home SOURCE: Cooperative Institutional Research Program (CIRP) The American Freshman: National Norms Fall 2016 CIRP; page 27 https://www.heri.ucla.edu/monographs/TheAmericanFreshman2016.pdf
Slide 12: Transitioning from destination to commuter campus model
12 Transitioning from destination to commuter campus model DALLAS 2010 • 100-150K square feet, depending on program offerings • Average student capacity of 750 • ~$10-$15 million capital investment • Accretive to earnings in 18 months • Cumulative cash flow breakeven by year 4 LONG BEACH 2015
Slide 13: New commuter campus – Bloomfield, New Jersey
13 New commuter campus – Bloomfield, New Jersey • Capital investment of ~$11m • ~$6m of EBITDA loss in year 1 • Accretive to earnings in 18 months • Cash flow break even by year 4 • IRR 35%+ See Appendix for Bloomfield, NJ Pro-Forma State-of-the-industry training facility 100,000 square feet Auto, d
Slide 14: Enhance utilization of existing space with new programs
14 Enhance utilization of existing space with new programs Review opportunities to divest real estate and/or not renew leases Explore subleasing options for existing capacity Right-sizing destination campuses for efficiency = Current initiative; relevant dates not yet finalized AVONDALE, AZ Welding
Slide 15: Adding new, differentiated program offerings
15 Adding new, differentiated program offerings CNC MACHINING • High demand for technicians • 36-week program at NASCAR Technical Institute • Only CNC school affiliated with Roush Yates & NASCAR WELDING • High demand for technicians • 36-wk program in Rancho Cucamonga, CA & Avondale, AZ • Expanding
Slide 16: Evolving strategy to better reach and engage students
16 Evolving strategy to better reach and engage students HIGH SCHOOL GRADS ADULT LEARNERS Steady Declining Improving 45% 15% 40% igh school grads Veterans dult learners Field team visits schools to generate interest and help students apply; working to overcome “college for all” mentality; improving
Slide 17: Focusing on growth and efficiency
Focusing on growth and efficiency 17 Demand for skilled technicians remains at historic highs, but the habits and preferences of our prospective students have fundamentally changed. • Reinventing our go-to-market strategy and the customer experience to expand our reach and the way we engage with pro
Slide 18: Stabilizing the business and investing for growth
2016 – recapitalized our business to enable our future growth strategy 2017 – implemented our Financial Improvement Plan to drive cost efficiencies 2018 – investing to: • open Bloomfield, New Jersey campus • expand welding program to new locations • re-tool marketing and student recruitment efforts
Slide 19: Q1 performance reflects investment in growth initiatives
19 Q1 performance reflects investment in growth initiatives (1) A reconciling table for EBITDA is available in the Appendix of this presentation 3 Months Ended Q1’18 Q4‘17 Q3‘17 Q2‘17 Q1‘17 New student starts Y/Y growth/(decline) 1,300 (7.1)% 5,600 -- 1,800 12.5% 1,900 (17.4)% 1,400 (22.2)% Average
Slide 20: 2018 financial outlook
20 2018 financial outlook • Start growth: low single digits; weighted toward back of year • Average population: down mid-single digits • Revenue: $310 – $320 million • Operating expenses: $340 – $345 million • Operating loss: $20 – $25 million; negative EBITDA due to revenue decline and investments
Slide 21: Why invest in UTI
21 Strong and growing end-market demand Strong student value proposition Business is stabilizing; enrollment near inflection point Why invest in UTI Leader in transportation technician training Industry partnerships that create competitive advantage Investing in strengths to drive growth Subsiding r
Slide 22: Appendix
Appendix
Slide 23: Management team
23 Management team – more than 140 combined years of education experience Kim McWaters • Education industry experience: business strategy, operations, marketing and admissions President & CEO Bryce Peterson • Education industry experience: finance, accounting, compliance, and information technology
Slide 24: A highly qualified Board of Directors
24 A highly qualified Board of Directors Robert DeVincenzi Non-Executive Chairman, Universal Technical Institute; Principal, Lupine Ventures; Former President and CEO of Redflex Holdings Ltd. William J. Lennox, Jr. Former Superintendent of the United States Military Academy at West Point; President,
Slide 25: Industry partnerships that deliver value
25 Industry partnerships that deliver value * Based on comparison with graduates from core programs between October 1, 2007, and September 30, 2014. PARTNERS • Efficient hiring source • Lowers costs • Techs who are ready to work UTI • Current technology and tools • Increased marketing impact • Lower
Slide 26: College Scorecard and 10-year median earnings
College Scorecard and 10-year median earnings Data for the different institutions was gathered by averaging the graduation rates and 10-year median earnings figures provided on the College Scorecard for schools in the following categories: Ten-year median earnings are calculated by determining the m
Slide 27: A long history of entering and executing in new markets
27 200 250 300 350 400 450 500 550 600 650 UTI Competitor 0 200 400 600 800 1000 1200 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 -P re lim UTI Competitor A long history of entering and executing in new markets PHILADELPHIA MARKET ENTRY(a) DALLAS/FORT WORTH MARKET ENTRY(b
Slide 28: Long Beach campus cash flows
28 (a) Representative cash flows from Long Beach campus exclude allocated corporate and marketing costs and working capital considerations (b) Excludes Rancho Cucamonga cannibalization impact which is mitigated through welding launch and facility downsizing in process Long Beach campus cash flows Lo
Slide 29: Bloomfield, NJ campus cash flows
29 Bloomfield, NJ campus cash flows • ~$11m capital investment and ~$6m of EBITDA loss in year 1 • 110k sq. ft. facility; rent ~$15/ft. • Accretive to earnings in 18 months; cumulative cash flow breakeven by year 4 • Average student count assumed to scale to ~650 by FY22 NJ pro-forma cash flows ($mm
Slide 30: Avondale Welding program cash flows
30 Avondale Welding program cash flows (a) Representative pro-forma cash flows for UTI’s Welding program launched at the Avondale campus in January 2018 (b) EBITDA contribution includes targeted marketing investments and support related to the Avondale Welding, but excludes allocated corporate overh
Slide 31: Statement of loss
31 (1) A reconciling table for EBITDA is available in the Appendix of this presentation Statement of loss ($ in thousands, except per share amounts) 3 Mos. 12/31/17 3 Mos. 9/30/17 3 Mos. 6/30/17 3 Mos. 3/31/17 3 Mos. 12/31/16 Revenues $ 81,156 $ 81,329 $ 76,258 $ 82,497 $ 84,179 Operating expenses:
Slide 32: Balance sheet summary
32 Balance sheet summary ($ in thousands) • On June 24, 2016, UTI raised $70 million through the sale of Series A Convertible Preferred Stock to Coliseum Holdings • The proceeds are being used to fund strategic long- term growth initiatives: - Smaller campus strategy - New programs in existing marke
Slide 33: ASC adopted in Q1 2018
ASC 606 adopted in Q1 2018 33 • UTI is early adopting ASC 606 (Revenue from Contracts with Customers) • The SEC encourages companies to early adopt, when possible • 8 of 10 of our peer group* are required to comply starting January 1, 2018 • Adjusting entry to equity provides additional strength to
Slide 34: Use of Non-GAAP financial information
Use of Non-GAAP financial information This presentation contains non-GAAP (Generally Accepted Accounting Principles) financial measures, which are intended to supplement, but not substitute for, the most directly comparable GAAP measures. Management chooses to disclose to investors, these non-GAAP f
Slide 35: EBITDA reconciliation
35 EBITDA reconciliation ($ in thousands) 3 Mos. 12/31/17 3 Mos. 9/30/17 3 Mos. 6/30/17 12 Mos. 3/31/17 12 Mos. 12/31/16 Net loss $ (1,135) $ (757) $ (3,917) $ (1,730) $ (1,724) Interest expense, net 431 461 559 712 749 Income tax expense (benefit) (2,829) (325) 967 2,145 2,610 Depreciation and amor
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