Universal Technical Institute Inc · NYSE:UTI
Universal Technical Institute — Q3 2019 Earnings Presentation
37 slides from Universal Technical Institute's earnings presentation, August 2019
Slide 1: Investor Presentation
Investor Presentation August 2019
Slide 2: Safe harbor
Safe harbor 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 c
Slide 3: Nation's leading provider of skilled transportation technicians
Nation’s leading provider of skilled transportation technicians • 53 years of training technicians • 220,000+ graduates • 30+ leading manufacturer partners - BMW, Cummins, Ford, Harley-Davidson • 84% graduate employment rate1 • $317.0 million in revenue in fiscal 2018 • $42.7 million in cash & equiv
Slide 4: A national campus network with capacity for expansion
A national campus network with capacity for expansion ESTABLISHED FOOTPRINT • 13 campuses in nine states • 2.32 million campus square feet Metro-Commuter campus format In teach-out; estimated closure Fall 2020 4
Slide 5: Impressive training facilities
Impressive training facilities Bloomfield, NJ campus 5
Slide 6: State-of-the-industry vehicles and technology
State-of-the-industry vehicles and technology Long Beach, CA campus 6
Slide 7: More market share than our three closest competitors combined
More market share than our three closest competitors combined 14% UTI UTI Lincoln Tech graduates more 5% 2% 1% UNOH (NFP) 59% auto/diesel techs WyoTech (NFP) 9% than any other Other for-profit school in the country. 9% 1% Other not-for-profit 4-year colleges Community colleges Source: IPEDS, provisi
Slide 8: Partnerships with the world's leading manufacturers
Partnerships with the world’s leading manufacturers 84% graduate employment rate* *UTI employment rate for 2017 graduates who were employed within one year of graduation was 84%. See UTI’s 10-K filed with the SEC on November 30, 2018 for additional information. For 2017, we had 8,539 total graduates
Slide 9: Delivering higher 10-year median earnings
Delivering higher 10-year median earnings $55,000 46% $45,200 $45,712 increase $45,000 $30,915 $35,000 $25,000 Community UTI 1 Liberal arts colleges colleges Source: The College Scorecard. See Appendix for details and calculation methodology. UTI cannot guarantee employment or salary. 1 UTI of Arizo
Slide 10: Demand for auto/diesel technicians far exceeds supply
Demand for auto/diesel technicians far exceeds supply 100,000 50,000 new auto/diesel total auto/diesel technicians graduates needed every year in 2017 through 2026 SOURCES: BLS Employment Outlook Summary, October 2017. Includes new job growth and replacements. IPEDS, provisional 2017 postsecondary c
Slide 11: Adapting to changing student expectations
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 11
Slide 12: Transitioning from destination to commuter campus model
Transitioning from destination to commuter campus model DALLAS, TX 2010 LONG BEACH, CA 2015 • 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 1
Slide 13: New commuter campus – Bloomfield, NJ
New commuter campus – Bloomfield, NJ • Capital investment of $9.2m (a) • $3.7 million EBITDA in 2019 • Accretive to earnings in 18 months • IRR 35%+ State-of-the-industry training facility 108,000 square feet Auto, diesel and manufacturer-specific training See Appendix for Bloomfield, NJ Pro-Forma O
Slide 14: Right-sizing destination campuses for efficiency
Right-sizing destination campuses for efficiency Add new Divest real Sub-lease programs estate space Enhance utilization 1 of existing space with new programs AVONDALE, AZ PHOENIX, AZ Welding FY18 FY17 RANCHO CUCAMONGA, CA Welding FY17 FY18 Review 2 opportunities to SACRAMENTO, CA ORLANDO, FL
Slide 15: Adding new, differentiated program offerings
Adding new, differentiated program offerings WELDING CNC MACHINING • High demand for technicians • High demand for technicians • 36-wk program in Rancho Cucamonga, CA, Avondale, AZ, • 36-week program at NASCAR Technical Institute and Dallas, TX • Only CNC school affiliated with Roush Yates & NASCAR
Slide 16: Evolving strategy to better reach and engage students
Evolving strategy to better reach and engage students High school GRADS HIGH SCHOOL grads Veterans Adult learners ADULT LEARNERS Growing Declining Stabilizing 51% 8% 41% Field team visits schools to generate Field team visits bases to help Optimizing traditional and digital interest and help student
Slide 17: Building cash flow and profitability
Building cash flow and profitability 2017 – implemented our Financial Improvement Plan to drive cost efficiencies 2018 Highlights: • focused on strategic investments in marketing and admissions, retention and student services • new student starts for fiscal 2018 were up 1.2% compared to 2017, markin
Slide 18: Q3 performance reflects financial turn in business
Q3 performance reflects financial turn in business ($ in millions, except for 3 Months Ended student data and EPS) Q3’19 Q2‘19 Q1’19 Q4’18 Q3‘18 Adjusted new student starts1 1,682 1,963 1,480 5,829 1,503 Y/Y growth/(decline) 11.9% 11.0% 16.9% 9.0% (13.0)% Average enrollment 9,884 10,576 11,225 10,49
Slide 19: 2019 financial outlook – raised from Q1 2019
2019 financial outlook – raised from Q1 2019 Raised 2019 Guidance (Q1 2019 guidance in parenthesis) • Student start growth: Excluding Norwood, MA campus high single digit growth • Average population growth: low single digits • Revenue: $327 – $331 million ($322 - $332 million) • Operating expenses:
Slide 20: Why invest in UTI
Why invest in UTI Strong and growing end-market demand Leader in transportation technician training Industry partnerships that create competitive advantage Attractive student value proposition Business is growing; projected average student population growth in FY19 Strong cash position and balance s
Slide 21: Appendix
Appendix
Slide 22: Seasoned management team
Seasoned management team Jerome Grant, CEO Troy Anderson, EVP & CFO Business transformation, growth Financial strategy, FP&A, accounting, strategy, product development, treasury, tax and compliance business development Sherrell Smith, EVP Campus Piper Jameson, EVP & CMO Eric Severson, SVP Operations
Slide 23: A highly qualified Board of Directors
A highly qualified Board of Directors Robert DeVincenzi David Blaszkiewicz Jerome Grant Non-Executive Chairman, President and Chief Chief Executive Officer, Universal Technical Institute; Executive Officer, Universal Technical Principal, Lupine Ventures; Invest Detroit Institute Former President and
Slide 24: Industry partnerships that deliver value
Industry partnerships that deliver value PARTNERS STUDENTS UTI • Efficient hiring source • Pipeline to jobs • Current technology and tools • Lowers costs • Better jobs and higher starting • Increased marketing impact wages* • Techs who are ready to work • Lower expenses and Capex • Tuition support •
Slide 25: College Scorecard and 10-year median earnings
College Scorecard and 10-year median earnings $55,000 $45,200 $45,712 $45,000 $30,915 $35,000 $25,000 Community UTI of Arizona Liberal arts colleges colleges Data for the different institutions was gathered by averaging the 10-year median earnings figures provided on the College Scorecard for school
Slide 26: A long history of entering and executing in new markets
A long history of entering and executing in new markets PHILADELPHIA MARKET ENTRY(a) DALLAS/FORT WORTH MARKET ENTRY(b) 1200 650 600 1000 550 800 500 Completions Completions 450 600 400 400 350 300 200 250 0 200 2016-Prelim 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 UTI Competitor UTI Com
Slide 27: Long Beach, CA campus cash flows
Long Beach, CA campus cash flows Long Beach cash flows ($m)(a) FY15A FY16A FY17A FY18A FY19P Revenue $0.7 $12.2 $18.3 $20.9 $22.4 EBITDA contribution(b) (3.6) 2.9 9.0 11.7 13.4 Net finance obligation (0.2) (1.4) (1.4) (1.3) (1.3) Capital expenditures (15.8) (0.2) (0.4) (0.0) (0.1) Pre-tax cash flow
Slide 28: Bloomfield, NJ campus cash flows
Bloomfield, NJ campus cash flows NJ pro-forma cash flows ($m)(a) FY18A FY19P FY20P FY21P FY22P Revenue $0.6 $10.7 $17.2 $19.2 $19.8 EBITDA contribution(b) (4.9) 3.7 9.5 10.6 10.9 Capital expenditures(c) (9.2) (0.3) (0.1) (0.2) (0.2) Pre-tax cash flow $(14.1) $3.4 $9.4 $10.4 $10.7 Perpetuity IRR 35%+
Slide 29: Avondale, AZ Welding program cash flows
Avondale, AZ Welding program cash flows Welding pro-forma cash flows ($m)(a) FY17A FY18A FY19P FY20P FY21P Revenue $0.0 $1.2 $3.3 $3.0 $3.1 EBITDA contribution(b) (0.1) 0.5 2.4 2.0 2.1 Capital expenditures(c) (0.4) (1.1) 0.0 0.0 0.0 Pre-tax cash flow $(0.5) $(0.6) $2.4 $2.0 $2.1 Perpetuity IRR 80%+
Slide 30: Teach out of Norwood, MA Campus
Teach out of Norwood, MA Campus • February 2019 - announced exit and teach out of the Norwood, MA campus; expected to be completed in the fall of 2020 • Expected long term financial improvement starting in 2021: • improvement in annual pre-tax net income, EBITDA and cash flows between $4 million and
Slide 31: Statements of loss
Statements of loss ($ in thousands, except per share amounts) 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 6/30/19 3/31/19 12/31/18 9/30/18 6/30/18 Revenues $ 79,042 $ 81,746 $ 83,050 $ 80,256 $ 74,890 Operating expenses: Educational services & facilities 42,836 45,822 45,735 47,954 44,737 Selling, general &
Slide 32: Balance sheets summary
Balance sheets summary ($ in thousands) At: 06/30/19 9/30/18 • On June 24, 2016, UTI raised $70 million through the sale of Series A Convertible Preferred Stock to Cash & cash equivalents $ 42,689 $ 58,104 Coliseum Holdings Restricted cash* 13,534 14,055 • The proceeds are being used to fund strateg
Slide 33: 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 34: EBITDA reconciliation
EBITDA reconciliation ($ in thousands) 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 6/30/19 3/31/19 12/31/18 9/30/18 6/30/18 Net loss, as reported $ (365) $ (5,263) $ (7,717) $ (11,001) $ (11,713) Interest expense, net 444 416 411 480 474 Income tax expense (benefit) 31 89 133 9 (158) Depreciation and amortiz
Slide 35: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation ($ in thousands) 3 Mos. 3 Mos. 9 Mos. 9 Mos. 6/30/19 6/30/18 6/30/19 6/30/18 EBITDA $ 4,436 $ (7,205) $ 1,202 $ (10,377) Non-recurring consulting fees for transformation -- 1,573 4,224 4,135 initiative(1) Start-up costs associated with Bloomfield, NJ campus -- 1,760 --
Slide 36: Adjusted Free Cash Flow
Adjusted Free Cash Flow ($ in thousands) 9 Mos. 9 Mos. 6/30/19 6/30/18 Cash flow used in operating activities, as reported $ (7,124) $ (22,456) Purchase of property and equipment (5,301) (17,088) Non-recurring consulting fees for transformation initiative(1) 3,950 4,306 Cash outflow associated with
Slide 37: Adjusted Operating Loss
Adjusted Operating Loss ($ in thousands) 3 Mos. 3 Mos. 9 Mos. 9 Mos. 6/30/19 6/30/18 6/30/19 6/30/18 Loss from operations, as reported $ (455) $ (11,800) $ (13,240) $ (24,224) Non-recurring consulting fees for transformation initiative(1) -- 1,573 4,224 4,135 Start-up costs associated with Bloomfiel
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