Universal Technical Institute Inc · NYSE:UTI
Universal Technical Institute — Investor Presentation (May 2019)
38 slides from Universal Technical Institute's investor presentation, May 2019
Slide 1: Investor Presentation
Investor Presentation May 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 • 200,000+ graduates • 30+ leading manufacturer partners - BMW, Cummins, Ford, Harley-Davidson • 84% graduate employment rate1 • $317.0 million in revenue in fiscal 2018 • $52.9 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 In teach-out; estimated closure Fall 2020 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 UTI Lincoln Tech graduates more 5% 2% 1% UNOH (NFP) 59% auto/diesel techs WyoTech (NFP) than any other 9% 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 approximately 8,539 t
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) • ~5m 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 S
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 Dallas, TX • Only CNC school affiliated with Roush Yates & NASCAR Cr
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% 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 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
Slide 19: Q2 performance reflects investment in growth initiatives
Q2 performance reflects investment in growth initiatives ($ in millions, except for 3 Months Ended student data and EPS) Q2‘19 Q1’19 Q4’18 Q3‘18 Q2’18 New student starts 2,022 1,511 6,022 1,548 1,819 Y/Y growth/(decline) 11.2% 14.8% 8.5% (12.7)% (2.7)% Average enrollment 10,576 11,225 10,496 9,484 1
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 • Adjusted operating loss: $6 – $11 million
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 $25,000 Community UTI of Arizona Liberal arts colleges colleges Data for the different institutions was gathered by averaging the 10-year median earnings figures provided on the College Scorecard for school
Slide 27: A long history of entering and executing in new markets
A long history of entering and executing in new markets PHILADELPHIA MARKET ENTRY(a) DALLAS/FORT WORTH MARKET ENTRY(b) 1200 650 600 1000 550 500 Completions 800 Completions 450 600 400 400 350 300 200 250 0 200 2016-Prelim 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 UTI Competitor UTI Com
Slide 28: Long Beach, CA campus cash flows
Long Beach, CA campus cash flows Long Beach cash flows ($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 $11.9 $17.8 $19.2 $19.7 EBITDA contribution(b) (4.9) 4.3 8.8 9.5 9.6 Capital expenditures(c) (9.2) (0.6) (0.1) (0.2) (0.2) Pre-tax cash flow $(14.1) $3.7 $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 $2.9 $2.6 $2.9 EBITDA contribution(b) (0.1) 0.5 1.9 1.7 1.9 Capital expenditures(c) (0.4) (1.1) 0.0 0.0 0.0 Pre-tax cash flow $(0.5) $(0.6) $1.8 $1.8 $1.9 Perpetuity IRR 80%+ • 1
Slide 31: Teach out of Norwood, MA Campus
Teach out of Norwood, MA Campus • February 2019 - announced exit and teach out of the Norwood 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 $5
Slide 32: Statement of loss
Statement of loss ($ in thousands, except per share amounts) 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 Revenues $ 81,746 $ 83,050 $ 80,256 $ 74,890 $ 80,663 Operating expenses: Educational services & facilities 45,822 45,735 47,954 44,737 45,817 Selling, general & a
Slide 33: Balance sheet summary
Balance sheet summary ($ in thousands) At: 03/31/19 9/30/18 Cash & cash equivalents/investments $52,925 $58,104 Restricted cash* 14,019 14,055 • On June 24, 2016, UTI raised $70 million through Current assets 101,133 116,795 the sale of Series A Convertible Preferred Stock to Coliseum Holdings Total
Slide 34: Use of Non-GAAP financial information
Use of Non-GAAP financial information This presentation contains non-GAAP (Generally Accepted Accounting Principles) financial measures, which are intended to supplement, but not substitute for, the most directly comparable GAAP measures. Management chooses to disclose to investors these non-GAAP fi
Slide 35: EBITDA reconciliation
EBITDA reconciliation ($ in thousands) 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3 Mos. 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 Net loss $ (5,263) $ (7,717) $ (11,001) $ (11,713) $ (8,833) Interest expense, net 416 411 480 474 500 Income tax expense (benefit) 89 133 9 (158) (37) Depreciation and amortization 4,4
Slide 36: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation ($ in thousands) 3 Mos. 3 Mos. 6 Mos. 6 Mos. 3/31/19 3/31/18 3/31/19 3/31/18 EBITDA $ (319) $ (4,105) $ (3,234) $ (3,172) Non-recurring consulting fees for transformation -- 1,163 4,224 2,563 initiative(1) Start-up costs associated with Bloomfield, New Jersey -- 827 --
Slide 37: Adjusted Free Cash Flow
Adjusted Free Cash Flow ($ in thousands) 6 Mos. 6 Mos. 3/31/19 3/31/18 Cash flow provided by operating activities, as reported $ 2,808 $ (5,951) Purchase of Property and Equipment (4,782) (7,613) Non-recurring consulting fees for transformation initiative(1) 3,950 2,563 Cash outflows associated with
Slide 38: Adjusted Operating Loss
Adjusted Operating Loss ($ in thousands) 3 Mos. 3 Mos. 6 Mos. 6 Mos. 3/31/19 3/31/18 3/31/19 3/31/18 Loss from operations, as reported $ (5,580) $ (8,820) $ (12,785) $ (12,424) Non-recurring consulting fees for transformation initiative(1) -- 1,163 4,224 2,563 Start-up costs associated with Bloomfie
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