Universal Technical Institute Inc · NYSE:UTI
Universal Technical Institute — Investor Presentation (March 2020)
41 slides from Universal Technical Institute's investor presentation, Mar 13, 2020
Slide 1: Universal Technical Institute Investor Presentation
Universal Technical Institute Investor Presentation February 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 54 _________________ YEARS 11K+ _________________ STUDENTS 35+ _________________ MANUFACTURING 220K+ _________________ GRADUATES SINCE 1965 BRAND PARTNERS 4,600+ _________________ TUITION REIMBURSEMENT 86% _________________ EMPLOYMENT RATE EMPLO
Slide 4: State-of-the-Industry Technology and Training
State-of-the-Industry Technology and Training 4
Slide 5: 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 Evolved strategy fueling EBITDA and student population growth Optimized for any macro economic cycle with counter cyclical up
Slide 6: Strategic Initiatives Deliver Significant Achievements
Strategic Initiatives Deliver 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: Strategic Initiatives • Up 5 consecutive qtrs through FYQ42019 Executed Transformati
Slide 7: 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 8: 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 9: 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 • Launching in Hou
Slide 10: 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, new programs CUCAMONGA, CA Optimize SF FY18 MOORESVILLE, NC CNC FY17 Programs, Optim
Slide 11: 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 12: 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 13: Delivering Higher 10-year Median Earnings
Delivering Higher 10-year Median Earnings $45,200 $45,488 47% Increase $30,830 1 Community colleges UTI Liberal arts colleges Source: College Scorecard Data. 10-year median earnings are calculated by determining the median earnings of former students, who received federal financial aid, at 10 years
Slide 14: Well Positioned National Campus Network
Well Positioned National Campus Network Existing capacity to increase students plus additional market opportunities to add rapidly accretive campuses NATIONAL FOOTPRINT • 13 campuses • 9 states • 2.2M SF • Located in high demand job markets • Easy access to major population Metro-Commuter campus for
Slide 15: Impressive Training Facilities Nationwide
Impressive Training Facilities Nationwide 1 5
Slide 16: Industry Partnerships that Deliver Value
Industry Partnerships that Deliver Value 86% graduate industry employment rate1 PARTNERS STUDENTS UTI • Efficient hiring source • Pipeline to jobs • Current technology and tools • Lowers costs • Better jobs and higher • Increased marketing impact starting wages2 • Techs who are ready to work • Lower
Slide 17: Transformation Yielding Strong Improvements
Transformation Yielding Strong Improvements ($ in millions, except for student data) Actual Guidance ASC 842 Impact3 Revenue Adjusted Operating Income (Loss)1 Adjusted EBITDA1 $26.5 - $31.5 $338.0 - $345.0 ($5.2) $13.0- $18.0 ($1.6) $331.5 $17.0 $317.0 $(1.7) $(7.8) $(25.7) 2018A 2019A 2020G 2018A 2
Slide 18: Q1 FY2020 Reflects Continued Momentum
Q1 FY2020 Reflects Continued Momentum Q1 FY20 Q1 FY19 YoY Actuals Actuals Change Student start growth 1,594 1,480 7.7% (excluding Norwood, MA) Average population 11,600 11,225 3.3% Revenue $87.2M $83.1M 5.0% Operating expense $83.0M $90.3M (8.1%) Operating income (loss) $4.3M $(7.2)M $11.5M Adjusted
Slide 19: Quarterly Performance Trends Show Continued Positive Momentum
Quarterly Performance Trends Show Continued Positive Momentum 3 Months Ended ($ in millions, except for student data and EPS) Q1’20 Q4’19 Q3’19 Q2‘19 Q1’19 Q4’18 Q3‘18 Q2’18 Q1’18 Adjusted new student starts1 1,594 6,437 1,682 1,963 1,480 5,829 1,503 1,768 1,266 Y/Y growth/(decline) 7.7% 10.4% 11.9%
Slide 20: Maintaining Overall FY 2020 Guidance
Maintaining Overall FY 2020 Guidance Welding program expansion investment absorbed in prior guidance except capex FY 2020 Guidance FY 2019 Actuals Student start growth (excluding Up 2.5% – 4.5% 11.5% Norwood, MA) Average population growth Up 1.0% – 2.0% 2.5% Revenue(1) $338.0M – $345.0M $331.5M Oper
Slide 21: Capital From Offering Will Be Deployed in Areas Driving Growth
Capital From Offering Will Be Deployed in Areas Driving 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 21
Slide 22: 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 23: 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 $19.7 EBITDA contribution (3.6) 2.9 9.0 11.7 13.3
Slide 24: Long History of Entering and Executing in New Markets
Long History of Entering and Executing in New Markets PHILADELPHIA, PA MARKET ENTRY(a) DALLAS/FORT WORTH, TX MARKET ENTRY(b) 1200 650 600 1000 550 800 500 Completions Completions 450 600 400 400 350 300 200 250 0 200 2016-Prelim 2010 2011 2012 2013 2014 2015 2016-Prelim 2005 2006 2007 2008 2009 2010
Slide 25: Exploring Additional Opportunities: Program Expansion
Exploring Additional Opportunities For Long-Term Growth: Program Expansion NEW PROGRAMS AT EXISTING CAMPUSES − Leverage existing campus footprint to add new, high demand programs − Continued expansion in welding through the introduction to additional campuses each year which represent high ROI inves
Slide 26: Illustrative Welding Financials – Avondale, AZ
Illustrative Welding Financials – Avondale, AZ Pro-forma financials ($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 $2.1 Perpetuity IRR 80%+
Slide 27: Exploring Additional Opportunities: Inorganic Growth
Exploring Additional Opportunities For Long-Term Growth: Inorganic Growth INORGANIC GROWTH − Acquisition pipeline in development and expanding − Initial targets under review would be immediately accretive − Targets could range from new regions, program expansion, scale opportunities and business div
Slide 28: Exploring Additional Opportunities: Business Model Extensions
Exploring Additional Opportunities For Long-Term Growth: Business Model Extensions BUSINESS MODEL EXTENSIONS − Multiple strategic initiatives have been identified that would allow for a diversification strategy − Diversification strategies designed to reduce the reliance Title IV as a funding source
Slide 29: Industry Leader with a Strong Value Proposition for Students and Shareholders
Industry Leader with a Strong Value Proposition for Students and Shareholders 29
Slide 30: Appendix
UNIVERSAL ] TECHNICAL | INSTITUTE APPENDIX
Slide 31: Talented Management Team with New Leadership
Talented Management Team with New Leadership Jerome Grant, CEO Troy Anderson, EVP & CFO Sherrell Smith, EVP Campus Operations & Services Business transformation, growth strategy, Financial strategy, FP&A, accounting, Campus operations including product and business development treasury, tax and comp
Slide 32: Highly Qualified Board of Directors
Highly Qualified Board of Directors Robert DeVincenzi David Blaszkiewicz Jerome Grant Non-Executive Chairman, President and Chief Chief Executive Officer, Universal Technical Institute; Executive Officer, Universal Technical Principal, Lupine Ventures; Invest Detroit Institute Former President and C
Slide 33: Statements of Income (Loss)
Statements of Income (Loss) ($ in thousands, except per share amounts) 3 Mos. 12 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 12 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 12/31/19 9/30/19 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 9/30/18 6/30/18 3/31/18 12/31/17 Revenues $87,234 $331,504 $87,666 $79,042 $81,746 $83,050 $
Slide 34: Balance Sheet and Cash Flow Summary
Balance Sheet and Cash Flow Summary ($ in thousands) At: 12/31/19 9/30/19 3 Mos. 3 Mos. 12 Mos. 12 Mos. Cash & cash equivalents $ 70,533 $ 65,442 12/31/19 12/31/18 9/30/19 9/30/18 Net cash provided by (used in) Restricted cash* 14,930 15,113 $7,124 $4,410 $21,746 $(13,353) operating activities Curre
Slide 35: Impact of the New Leasing Standard (ASC 842)
Impact of the New Leasing Standard (ASC 842) Summary of the Financial Statement Impact(1) • UTI’s 2020 guidance includes the estimated impact Opening Balance Sheet Impact of the new leasing accounting standard Net Assets Net Liabilities Net Equity • UTI adopted the new standard effective 10/1/19 Add
Slide 36: Use of Non-GAAP Financial Information
Use of Non-GAAP Financial Information This presentation contains non-GAAP (Generally Accepted Accounting Principles) financial measures, which are intended to supplement, but not substitute for, the most directly comparable GAAP measures. Management chooses to disclose to investors these non-GAAP fi
Slide 37: Adjusted Operating Income (Loss)
Adjusted Operating Income (Loss) ($ in thousands) 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 12/31/19 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 12/31/17 Income (loss) from operations, as $ 4,254 $ 5,438 $ (455) $ (5,580) $ (7,205) $(11,051) $(11,800) $ (8,820) $(3,
Slide 38: EBITDA Reconciliation
EBITDA Reconciliation ($ in thousands) 3Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 12/31/19 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 12/31/17 Net income (loss), as reported $ 4,684 $ 5,477 $ (365) $ (5,263) $ (7,717) $(11,001) $(11,713) $ (8,833) $ (1,135) Interest
Slide 39: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation ($ in thousands) 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 12/31/19 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 12/31/17 EBITDA $ 7,774 $ 10,153 $ 4,436 $ (319) $ (2,915) $ (6,361) $ (7,205) $ (4,015) $ 843 Non-recurring consulting fee
Slide 40: Adjusted Free Cash Flow
Adjusted Free Cash Flow ($ in thousands) 3 Mos. 3 Mos. 12 Mos. 12 Mos. 12/31/19 12/31/18 9/30/19 9/30/18 Cash flow provided by (used in) operating activities, as reported $ 7,124 $ 4,410 $ 21,746 $ (13,353) Purchase of property and equipment (1,811) (2,779) (6,453) (20,606) Severance payment due to
Slide 41: Universal Technical Institute
UNIVERSAL TECHNICAL INSTITUTE
Universal Technical Institute — Investor Presentation (March 2020) on 6ix