34 slides from Universal Technical Institute's earnings presentation, Nov 29, 2018
Slide 1: Investor Presentation
Investor Presentation November 29, 2018
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 • 200,000+ graduates • 30+ leading manufacturer partners - BMW, Cummins, Ford, Harley-Davidson • 84% graduate employment rate1 • $317.0 million in revenue in fiscal 2018 • $58.1 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 Smaller campus format 4
Slide 5: Impressive training facilities
Impressive training facilities Bloomfield, New Jersey campus 5
Slide 6: State-of-the-industry vehicles and technology
State-of-the-industry vehicles and technology Long Beach, California campus 6
Slide 7: More market share than our three closest competitors combined
More market share than our three closest competitors combined 14% UTI Lincoln Tech UTI 5% graduates more 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 for additional information. For 2017, we had approximately 8,539 total graduates, of which approximately 8
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 2010 LONG BEACH 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 12
Slide 13: New commuter campus – Bloomfield, New Jersey
New commuter campus – Bloomfield, New Jersey • Capital investment of $9.2m (a) • ~$6m of EBITDA loss in year 1 • Accretive to earnings in 18 months • Cash flow break even by year 4 • IRR 35%+ State-of-the-industry training facility 108,000 square feet Auto, diesel and manufacturer-specific training
Slide 14: Right-sizing destination campuses for efficiency
Right-sizing destination campuses for efficiency Add new Divest real Sub-lease 1 Enhance utilization of existing space programs estate space AVONDALE, AZ Welding FY18 with new programs PHOENIX, AZ FY17 2 Review opportunities to RANCHO CUCAMONGA, CA SACRAMENTO, CA Welding FY17 FY18 FY18 divest re
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 • Intend to expand to Dallas, TX in Q2 2019 • Only CNC school affiliat
Slide 16: Evolving strategy to better reach and engage students
Evolving strategy to better reach and engage students HIGH SCHOOL High school GRADS grads Veterans ADULT LEARNERS Adult learners Growing Declining Stabilizing 51% 9% 40% Field team visits schools to generate Field team visits bases to help Optimizing traditional and digital interest and help student
Slide 17: Focusing on growth and efficiency
Focusing on growth and efficiency 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 prospe
Slide 18: Stabilizing the business and investing for growth
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 Highlights: • focused on strategic investments in marketing and admissions, retention and student
Slide 19: Q4 performance reflects investment in growth initiatives
Q4 performance reflects investment in growth initiatives ($ in millions, except for 3 Months Ended student data and EPS) Q4‘18 Q3‘18 Q2’18 Q1’18 Q4‘17 New student starts 6,022 1,548 1,819 1,316 5,550 Y/Y growth/(decline) 8.5% (12.7)% (2.7)% (4.6)% (1.4)% Average enrollment 10,496 9,484 10,394 11,261
Slide 20: 2019 financial outlook
2019 financial outlook • We expect new student starts to grow in the mid to high single digits • Average population: grow in the low single digits • Revenue: $322 – $332 million • Operating expenses: $337 – $347 million • Operating loss: $10 – $15 million • Positive EBITDA: $5 – $11 million • Cash:
Slide 21: 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 balance sheet Investing in
Slide 22: Appendix
Appendix
Slide 23: Management team – more than 150 combined years of education experience
Management team – more than 150 combined years of education experience Kim McWaters, Pres.& CEO Scott Yessner, Interim CFO Jerome Grant, EVP & COO Piper Jameson, EVP & CMO Business strategy, operations, Financial services, strategy, re- Digital learning technology, Education industry, marketing mark
Slide 24: A highly qualified Board of Directors
A highly qualified Board of Directors Robert DeVincenzi Kimberly McWaters David Blaszkiewicz Non-Executive Chairman, President and Chief Executive President and Chief Universal Technical Institute; Officer, Universal Technical Executive Officer, Principal, Lupine Ventures; Institute Invest Detroit F
Slide 25: 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 26: 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 $25,000 Community UTI of Arizona Liberal arts colleges colleges Data for the different institutions was gathered by averaging the 10-year median earnings figures provided on the College Scorecard for school
Slide 27: A long history of entering and executing in new markets
A long history of entering and executing in new markets PHILADELPHIA MARKET ENTRY(a) DALLAS/FORT WORTH MARKET ENTRY(b) 1200 650 600 1000 550 Completions Completions 800 500 450 600 400 400 350 300 200 250 0 200 2016-Prelim 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 UTI Competitor UTI Com
Slide 28: Long Beach, CA campus cash flows
Long Beach, CA campus cash flows Long Beach cash flows ($mm)(a) FY15A FY16A FY17A FY18A FY19P Revenue $0.7 $12.2 $18.3 $20.9 $21.1 EBITDA contribution(b) (3.6) 2.9 9.0 11.7 12.0 Net finance obligation (0.2) (1.4) (1.4) (1.3) (1.3) Capital expenditures (15.8) (0.2) (0.4) (0.0) (0.1) Pre-tax cash flow
Slide 29: Bloomfield, NJ campus cash flows
Bloomfield, NJ campus cash flows NJ pro-forma cash flows ($mm)(a) FY18A FY19P FY20P FY21P FY22P Revenue $0.6 $11.5 $17.8 $19.2 $19.7 EBITDA contribution(b) (4.9) 3.1 8.8 9.5 9.6 Capital expenditures(c) (9.2) (0.4) (0.1) (0.2) (0.2) Pre-tax cash flow $(19.3) $2.7 $8.7 $9.3 $9.4 Perpetuity IRR 35%+ •
Slide 30: Avondale Welding program cash flows
Avondale Welding program cash flows Welding pro-forma cash flows ($mm)(a) FY17A FY18A FY19P FY20P FY21P Revenue $0.0 $1.2 $2.7 $2.6 $2.9 EBITDA contribution(b) (0.1) 0.5 1.8 1.7 1.9 Capital expenditures(c) (0.4) 1.1 0.0 0.0 0.0 Pre-tax cash flow $(0.5) $1.6 $1.8 $1.8 $1.9 Perpetuity IRR 80%+ • 1st p
Slide 31: Statement of loss
Statement of loss ($ in thousands, except per share amounts) 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 9/30/18 6/30/18 3/31/18 12/31/17 9/30/17 Revenues $ 80,256 $ 74,890 $ 80,663 $ 81,156 $ 81,329 Operating expenses: Educational services & facilities 47,954 44,737 45,817 44,081 44,919 Selling, general & a
Slide 32: Balance sheet summary
Balance sheet summary ($ in thousands) At: 9/30/18 9/30/17 Cash & cash equivalents/investments $58,104 $97,917 Restricted cash* 14,055 14,822 • On June 24, 2016, UTI raised $70 million through Current assets 116,795 146,826 the sale of Series A Convertible Preferred Stock to Coliseum Holdings Total
Slide 33: Use of Non-GAAP financial information
Use of Non-GAAP financial information This presentation contains non-GAAP (Generally Accepted Accounting Principles) financial measures, which are intended to supplement, but not substitute for, the most directly comparable GAAP measures. Management chooses to disclose to investors these non-GAAP fi
Slide 34: EBITDA reconciliation
EBITDA reconciliation ($ in thousands) 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 9/30/18 6/30/18 3/31/18 12/31/17 9/30/17 Net loss $ (11,001) $ (11,713) $ (8,833) $ (1,135) $ (757) Interest expense, net 480 474 500 431 461 Income tax expense (benefit) 9 (158) (37) (2,829) (325) Depreciation and amortizatio