Universal Technical Institute Inc · NYSE:UTI
Universal Technical Institute — FY2020 Earnings Presentation
52 slides from Universal Technical Institute's earnings presentation, Nov 18, 2020
Slide 1: Universal Technical Institute Fiscal 2020 Investor Presentation
Universal Technical Institute Fiscal 2020 Investor Presentation November 18, 2020 © 2020 Universal Technical Institute, Inc. All rights reserved.
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 ______________ 12K+ ______________ YEARS STUDENTS 35+ ______________ MANUFACTURING 225K+ ______________ GRADUATES SINCE 1965 BRAND PARTNERS 4,600+ ______________ INCENTIVE & TUITION 84% ______________ EMPLOYMENT RATE1 REIMBURSEMENT EMPLOYER L
Slide 4: State-of-the-Industry Technology and Training
State-of-the-Industry Technology and Training PAGE 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 PAGE 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 Evolved strategy fueling proposition which includes EBITDA and student blended learning model population growth Optimized for any macro I
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 Marketing & Students Employees Financials Admissions • CDC protocols for safety • CDC protocols for safety • Introduced virtual
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 Significantly Improved Results Student Starts and Population: Financial Improvement in FY19: • First average student growth in FY19 since • First YOY revenue growth since 2011 FY10 • $3.7M EBITDA contribution from Bloomfield • New
Slide 10: Transformation Yielded Strong Improvements
Transformation Yielded Strong Improvements ($ 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 Q2 FY20 TTM* FY 2018 FY 2019 Q2 FY20 TTM* FY 2018 FY 2019 Q2 FY20 TTM* Adjusted Free Cash Flow
Slide 11: Evolving Strategy to Better Reach and Engage Students
Evolving Strategy to Better Reach and Engage Students HIGH SCHOOL GRADS VETERANS ADULT LEARNERS 1 1 52% 17% 32% 1 Added reps and enhanced Assisting veterans, working to Optimizing traditional and marketing to better represent regain access and digital advertising to generate high-value, technical ed
Slide 12: 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 13: Differentiated Programs Driving Student Starts
Differentiated Programs Driving Student Starts WELDING CNC MACHINING CNC MACHINING • High demand for technicians • High demand for technicians • 36-week program in Rancho Cucamonga, CA, Avondale, AZ, • 36-week program at NASCAR Technical Institute and Dallas, TX, all running at or near capacity • On
Slide 14: Optimizing Real Estate Footprint for Efficiency
Optimizing Real Estate Footprint for Efficiency Completed In Process Evaluation Total Sq. Ft BLOOMFIELD, NJ* Programs 102,000 LONG BEACH, CA* Welding FY20 137,000 DALLAS, TX* Welding FY19 95,000 1 Enhance utilization of RANCHO Welding FY17, existing space with new CUCAMONGA, CA Optimize SF FY18 Prog
Slide 15: UTI Student Lifecycle
UTI Student Lifecycle ~271k Media Workable Leads ~25k Enrollments ~11k ~8k Starts Graduates* ~7k Employed in Field *All data is trailing twelve months as of September 30, 2020 and includes pro-forma adjustment PAGE 15 for graduates delayed in Q3 & Q4 FY20 due to COVID-19
Slide 16: Demand for Auto/Diesel Technicians Far Exceeds Industry Supply
Demand for Auto/Diesel Technicians Far Exceeds Industry Supply 100,000 ~1.0M ___________________ TECHNICIAN JOB OPENINGS BY 20293 50,000 260M+ ____________________ 1.3B+ _________________ VEHICLES IN THE VEHICLES ON THE UNITED STATES2 ROAD WORLDWIDE1 Auto/Diesel/CRRT technicians 2018 Graduates Annua
Slide 17: Market Share Exceeds Three Closest Competitors
Market Share Exceeds Three Closest Competitors 13% 5% UTI 2% Lincoln Tech 1% graduates more 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 com
Slide 18: Well Positioned National Campus Network
Well Positioned National Campus Network Available capacity to increase students plus additional market opportunities to add rapidly accretive campuses Overview: • 12 Campuses in 8 States • ~2.0M SF • Located in high demand job markets • Easy access to major population Welding Program Expansion: • Ho
Slide 19: Industry Partnerships that Deliver Value
Industry Partnerships that Deliver Value 84% graduate industry employment rate1 PARTNERS STUDENTS UTI • Efficient hiring source • Pipeline to jobs • Current technology and tools • Lowers costs • Better jobs and higher starting wages2 • Increased marketing • Techs who are ready to impact work • Tuiti
Slide 20: Second Half FY20 Results Show Timing Impacts of COVID-19
Second Half FY20 Results Show Timing Impacts of COVID-19 First half FY20 results showed continued momentum First Half YoY Second Half YoY Second $ Millions FY20 First Half FY20 Half Change Actuals Change Actuals Student start growth 3,687 7.1% 7,596 (6.4%) (excluding Norwood, MA) Average population
Slide 21: 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) 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 1 Adjusted new student starts 5,772 1,824 2,093
Slide 22: FY 2021 Guidance
FY 2021 Guidance * ($ in millions, except for student data) New Student Start Growth (Decline)1 Revenue Growth Adjusted EBITDA2 10% - 15% 10% - 15% $30 - $35 11.5% 4.6% $17.0 $14.0 (9.3)% (2.4)% 2019 2020 2021 2019 2020 2021 2019 2020 2021 Net Income Adjusted Free Cash Flow2,3 $14 - $19 $20 - $25 $2
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, and also consider return of capital to shareholders NEW PROGRAM CAMPUSES EXPANSIONS IN
Slide 24: Current Unemployment Scenario Comparison
Current Unemployment Scenario Comparison 2019 – 2020 trends are very different than 2007 – 2010 2020 Unemployment Claims* 2007 2008 2009 2010 2019 2020 25.0% 7,000,000 6,000,000 20.0% 5,000,000 20 - 24 Male Unemployment % Rate Total Initial Unemployment Claims 15.0% 4,000,000 3,000,000 10.0% 2,000,0
Slide 25: 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 20-24 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 26: 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% $400,000 Annual Revenue ($000s) 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 PAGE
Slide 27: Industry Leader with a Strong Value Proposition for Students and Shareholders
Industry Leader with a Strong Value Proposition for Students and Shareholders PAGE 27
Slide 28: Appendix
APPENDIX PAGE 28
Slide 29: 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 30: 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 31: Statements of Operations Trend
Statements of Operations Trend 12 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 12 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 9/30/20 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 9/30/19 6/30/19 3/31/19 12/31/18 Revenues $300,761 $76,327 $54,483 $82,717 $87,234 $331,504 $87,666 $79,042 $81,746 $83,050 Operating expenses: Educ
Slide 32: Balance Sheet and Cash Flow Summary
Balance Sheet and Cash Flow Summary At: 9/30/20 9/30/19 3 Mos. 12 Mos. 3 Mos. 12 Mos. 9/30/20 9/30/20 9/30/19 9/30/19 Cash & cash equivalents $ 76,803 $ 65,442 Net cash provided by (used Restricted cash* 12,116 15,113 $21,149 $11,032 $28,870 $21,746 in) operating activities Held-to-maturity 38,055 −
Slide 33: Impact of the New Leasing Standard (ASC 842)
Impact of the New Leasing Standard (ASC 842) • UTI adopted the new standard effective 10/1/19 Summary of the Financial Statement Impact(1) • Key impacts Opening Balance Sheet Impact $M Net Assets Net Liabilities Net Equity • UTI’s 2020 assets increased for the addition of Right of Use assets less th
Slide 34: Exploring Additional Opportunities: 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 35: Exploring Additional Opportunities: Program Expansion
Exploring Additional Opportunities For Long-Term Growth: Program Expansion NEW PROGAMS 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 invest
Slide 36: Exploring Additional Opportunities: 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 37: Exploring Additional Opportunities: 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 38: 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 FY20A FY21P FY22P Revenue $0.7 $12.2 $18.3 $20.9 $22.4 $0.6 $10.9 $14.6 $20.5 $21.1 EBITDA contribution (3.6) 2.9 9.0 11.7 13.3
Slide 39: Illustrative Welding Financials – Avondale, AZ
Illustrative Welding Financials – Avondale, AZ Pro-forma financials ($m) FY17A FY18A FY19A FY20A FY21P Revenue $0.0 $1.2 $3.4 $3.3 $3.2 EBITDA contribution(b) (0.1) 0.5 2.4 2.5 2.4 Capital expenditures(c) (0.4) (1.1) (0.0) 0.0 0.0 Pre-tax cash flow(a) $(0.5) $(0.6) $2.4 $2.5 $2.3 Perpetuity IRR 80%+
Slide 40: CARES Act and Compliance Statistics
CARES Act and Compliance Statistics PAGE 40
Slide 41: 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 42: CARES Act Tax Provisions and Impacts
COVID 19 Aid, Relief, and Economic Security (CARES) Act Tax Provisions and Impacts NOL Utilization Rules Impact to UTI • For the 12 months ended September 30, 2020, we have recorded an income tax receivable of $11.3M related to NOLs • $4.2M related to 2018 fiscal year losses that were carried back t
Slide 43: UTI Department of Education Regulatory Metrics
UTI Department of Education Regulatory Metrics The Department of Education uses the following three regulatory metrics when assessing for-profit school performance: 90/10: Regulation that governs for-profit higher education capping the percentage of revenue that a school can receive from federal fin
Slide 44: Summary of UTI Annual Report Data Submitted to ACCSC
Summary of UTI Annual Report Data Submitted to the Accrediting Commission of Career Schools and Colleges (ACCSC) Total Students Completion Students Available Total Employment Total Grads Avail. For Grad. Percentage for Employment Employed Percentage Avondale, AZ 1,810 1,380 76.2% 1,169 1,013 86.7% R
Slide 45: Department of Education Regulatory Metrics
Department of Education Regulatory Metrics Federal Funding by Classification ($ in millions) Avondale Houston MMI Avondale Houston MMI FY 2020 (10/1/19 – 9/30/20) Consolidated Consolidated OPEID1 OPEID2 OPEID3 OPEID1 OPEID2 OPEID3 Amounts Title IV 73.2 60.6 45.1 178.8 Proportions 82.1% 85.5% 80.1% 8
Slide 46: Non-GAAP Information
Non-GAAP Information PAGE 46
Slide 47: 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 48: Adjusted Operating Income (Loss) Trend
Adjusted Operating Income (Loss) Trend ($ in thousands) 12 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 12 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 9/30/20 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 9/30/19 6/30/19 3/31/19 12/31/18 Income (loss) from operations, as $(3,871) $6,153 $(13,779) $(499) $4,254 $(7,802) $5,438
Slide 49: EBITDA Reconciliation Trend
EBITDA Reconciliation Trend ($ in thousands) 12 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 12 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 9/30/20 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 9/30/19 6/30/19 3/31/19 12/31/18 Net income (loss), as reported $ 8,008 $ 6,450 $ (13,268) $ 10,142 $4,684 $(7,868) $5,477 $(365) $(5,
Slide 50: Adjusted EBITDA Reconciliation Trend
Adjusted EBITDA Reconciliation Trend ($ in thousands) 12 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 12 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 9/30/20 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 9/30/19 6/30/19 3/31/19 12/31/18 EBITDA $ 9,414 $ 9,620 $ (10,204) $ 2,224 $ 7,774 $ 11,355 $ 10,153 $ 4,436 $ (319) $ (2,915
Slide 51: Adjusted Free Cash Flow Trend
Adjusted Free Cash Flow Trend 12 Mos. 3 Mos. 12 Mos. 3 Mos. 12 Mos. 3 Mos. 9/30/20 9/30/20 9/30/19 9/30/19 9/30/18 9/30/18 Cash flow provided by (used in) operating activities, as $ 11,032 $ 21,149 $ 21,746 $ 28,870 $ (13,353) $ 9,103 reported Purchase of property and equipment (9,262) (2,072) (6,45
Slide 52: PAGE 52
INIVERSAL TECHNICAL INSTITUTE PAGE 52
Universal Technical Institute — FY2020 Earnings Presentation on 6ix