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Universal Technical Institute Reports Fiscal Year 2019 Third Quarter Results

SCOTTSDALE, Ariz., Aug. 8, 2019 /PRNewswire/ -- Universal Technical Institute, Inc. (UTI), the leading provider of transportation technician training, reported financial results for the fiscal 2019 third quarter ended June 30, 2019.

  • New student starts, excluding Norwood, MA campus, up 11.9% for the quarter and 13.0% year-to-date
  • Full year 2019 guidance raised, including expected operating cash flow of $12 million or greater and expected adjusted free cash flow of $10 million or greater
(PRNewsfoto/Universal Technical Institute,)

"During the third quarter of 2019, we generated strong revenue growth, delivered our fourth consecutive quarter of year-on-year start growth and, for the second quarter in a row, our average student population was up compared to the prior year," said Kim McWaters, UTI's President and Chief Executive Officer. "We are making consistent progress toward building a profitable business, and our significant momentum is the direct result of UTI's multi-year Transformation Plan.

"Over the past 18 months, we have redesigned core business processes, leveraged technology and analytics to efficiently attract more qualified potential students, successfully opened a new campus, expanded our welding programs, and further differentiated our industry-leading student value proposition. Even in a time of historically low unemployment, when people are far less likely to consider post-secondary education, these initiatives are producing results. We do not know when the macro trends will turn, but it is clear that we are building a business that can thrive in any market environment.

"We had 5.1% more students in school at the end of the third quarter of 2019 compared to the prior year, driving revenues 5.5% higher. Our focus on durable changes to our cost structure reduced operating expenses by 8.3%.

"Based on our top- and bottom-line performance, we are raising 2019 guidance across the board. We believe revenue will continue to increase -- driven by new student starts and a higher average student population -- and also expect to deliver further additional operating efficiencies. The combination should generate significant improvement to cash flow and operating results in 2020."

Operating Results for the Three-Month Period Ended June 30 2019 Compared to 2018

  • New student starts, excluding the Norwood, MA campus, were up 11.9%; new student starts, including the Norwood, MA campus, were up 8.7%.
  • Revenues increased 5.5% to $79.0 million compared to $74.9 million, driven by higher average full-time enrollment.
  • Operating expenses decreased by 8.3% to $79.5 million compared to $86.7 million, primarily due to lower contract and professional services expense and advertising expense, which was partially offset by an increase of $0.4 million in direct costs from the Bloomfield, NJ campus.
  • Operating loss was $0.5 million, compared to $11.8 million.
  • Net loss was $0.4 million, compared to $11.7 million.
  • Adjusted operating loss was $0.3 million, compared to $8.4 million. (See "Use of Non-GAAP Financial Information" below.)
  • Adjusted EBITDA gain was $4.5 million, compared to an adjusted EBITDA loss of $4.0 million.

Operating Results for the Nine-Month Period Ended June 30 2019 Compared to 2018

  • New student starts, excluding the Norwood, MA campus, were up 13.0%; new student starts, including the Norwood, MA campus, were up 11.4%.
  • Revenues increased 3.0% to $243.8 million compared to $236.7 million, driven by higher average full-time enrollment, net of a decrease in industry training revenue.
  • Operating expenses decreased 1.5% to $257.1 million compared to $260.9 million due to cost structure changes across multiple functions and categories, offset by $3.3 million of direct costs related to the growing student population at the Bloomfield, NJ campus, and $1.4 million of one-time costs for the Norwood, MA campus closure.
  • Operating loss was $13.2 million, compared to $24.2 million.
  • Net loss was $13.3 million, compared to $21.7 million, which included a $3.0 million tax benefit.
  • Adjusted operating loss was $7.5 million, compared to $17.0 million.
  • Adjusted EBITDA gain was $6.6 million, compared to an adjusted EBITDA loss of $3.7 million.
  • Cash flow used in operating activities was $7.1 million, improving $15.3 million.
  • Adjusted free cash flow was negative $7.2 million, improving $16.3 million.

 

Student Metrics



Three Months Ended June 30,


Nine Months Ended June 30,


2019


2018


2019


2018

Total starts

1,682



1,548



5,215



4,683


Total starts (excluding Norwood, MA campus)*

1,682



1,503



5,125



4,537


Average undergraduate full-time student enrollment

9,884



9,484



10,562



10,380


End of period undergraduate full-time student enrollment

9,462



9,000



9,462



9,000



* Starting with the third quarter fiscal 2019, UTI will be reporting operating metrics, such as students starts, excluding its Norwood, MA campus. As previously reported on the Current Report on Form 8-K filed with the SEC on February 19, 2019, Norwood is no longer accepting new student applications and will fully close in the fall of 2020. As such, the company believes it is appropriate to exclude its impact.

Raised 2019 Outlook

  • New student starts, excluding the Norwood, MA campus, is expected to grow in the high single digits in fiscal 2019.
  • Fiscal 2019 average student population is anticipated to increase in the low single digits as a result of the transformation and growth initiatives.
  • Full year 2019 revenue is expected to range between $327 million and $331 million, compared to $317 million in fiscal 2018, reflecting the expected increase in the average student population.
  • Operating expenses are expected to range between $336 million and $341 million, compared to $352.2 million in fiscal 2018. The decrease in operating expenses are driven across multiple expense categories.
  • Operating loss is expected to range between $8 million and $12 million. Adjusted operating loss is expected to range between $3 million and $7 million.
  • Operating cash flow is expected to be $12 million or greater, adjusted free cash flow is expected to be $10 million or greater, and the ending cash balance is expected to grow $2 million or more from year-end 2018.
  • Net loss is expected to range between $8 million and $12 million. Adjusted EBITDA is now expected to range between $14 million and $17 million, compared to between $9 million and $15 million as detailed in the company's prior guidance.
  • Capital expenditures are expected to range between $6 million and $7 million.

Conference Call

Management will hold a conference call to discuss the 2019 third quarter results on Thursday, August 8th at 1:30 p.m. PDT (4:30 p.m. EDT). This call can be accessed by dialing 412-317-6790 or 844-881-0138.  Investors are invited to listen to the call live at http://uti.investorroom.com/.  Please access the website at least 10 minutes early to register, download and install any necessary audio software.  A replay of the call will be available on the Investor Relations section of UTI's website for 90 days or the replay can be accessed through August 22, 2019 by dialing 412-317-0088 or 877-344-7529 and entering pass code 10133554.

Use of Non-GAAP Financial Information

This press release and the related conference call 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 financial measures because they provide an additional analytical tool to clarify the results from operations and help to identify underlying trends.  Additionally, such measures help compare the company's performance on a consistent basis across time periods.  Management defines adjusted EBITDA as net loss before interest expense, interest income, income taxes, depreciation, amortization and adjusted for items not considered as part of the company's normal recurring operations. Management defines adjusted operating loss as loss from operations, adjusted for items that affect trends in underlying performance from year to year and are not considered normal recurring cash operating expenses.  Management defines free cash flow as net cash  used in operating activities less capital expenditures.  Management defines adjusted free cash flow as net cash used in operating activities less capital expenditures, adjusted for items not considered as part of the company's normal recurring operations.  Management chooses to disclose any campus adjustments as direct costs (net of any corporate allocations).  Management utilizes adjusted figures as performance measures internally for operating decisions, strategic planning, annual budgeting and forecasting.  For the periods presented, this includes consulting fees incurred as part of the company's transformation initiative, startup costs related to the Bloomfield, NJ campus, and the teach out and closure of the Norwood, MA campus.  To obtain a complete understanding of the company's performance, these measures should be examined in connection with net loss, operating loss and net cash used in operating activities, determined in accordance with GAAP, as presented in the financial statements and notes thereto included in the annual and quarterly filings with the Securities and Exchange Commission.  Since the items excluded from these measures are significant components in understanding and assessing financial performance under GAAP, these measures should not be considered to be an alternative to net loss, operating loss or net cash used in operating activities as a measure of the company's operating performance or liquidity.  Exclusion of items in the non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring. Other companies, including other companies in the education industry, may calculate non-GAAP financial measures differently than UTI does, limiting their usefulness as a comparative measure across companies.  A reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP measures are included below.

Information reconciling forward-looking adjusted EBITDA, adjusted operating income and adjusted free cash flow to the most directly comparable GAAP financial measure is unavailable to the company without unreasonable effort. The company is not able to provide a quantitative reconciliation of adjusted EBITDA, adjusted operating income or adjusted free cash flow to the most directly comparable GAAP financial measure because certain items required for such reconciliation are uncertain, outside of the company's control and/or cannot be reasonably predicted, including but not limited to the provision for (benefit from) income taxes. Preparation of such reconciliation would require a forward-looking statement of income (loss) and statement of cash flows prepared in accordance with GAAP, and such forward-looking financial statements are unavailable to the company without unreasonable effort.

Safe Harbor Statement

All statements contained herein, other than statements of historical fact, are "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Such statements are based upon management's current expectations and are subject to a number of uncertainties that could cause actual performance and results to differ materially from the results discussed in the forward-looking statements. Factors that could affect the company's actual results include, among other things, changes to federal and state educational funding, changes to regulations or agency interpretation of such regulations affecting the for-profit education industry, possible failure or inability to obtain regulatory consents and certifications for new or expanding campuses, potential increased competition, changes in demand for the programs offered by UTI, increased investment in management and capital resources, the effectiveness of the recruiting, advertising and promotional efforts, changes to interest rates and unemployment, general economic conditions of the company and other risks that are described from time to time in the company's public filings. Further information on these and other potential factors that could affect the financial results or condition may be found in the company's filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date of this press release. Except as required by law, the company expressly disclaims any obligation to publicly update any forward-looking statements whether as a result of new information, future events, changes in expectations, any changes in events, conditions or circumstances, or otherwise.

About Universal Technical Institute, Inc.

With more than 220,000 graduates in its 53-year history, Universal Technical Institute, Inc. (UTI) is the nation's leading provider of technical training for automotive, diesel, collision repair, motorcycle and marine technicians, and offers welding technology and computer numerical control (CNC) machining programs. The company has built partnerships with industry leaders, outfits its state-of-the-industry facilities with current technology, and delivers training that is aligned with employer needs. Through its network of 13 campuses nationwide, UTI offers post-secondary programs under the banner of several well-known brands, including Universal Technical Institute (UTI), Motorcycle Mechanics Institute and Marine Mechanics Institute (MMI) and NASCAR Technical Institute (NASCAR Tech). The company is headquartered in Scottsdale, Arizona. For more information, visit uti.edu.

Company Contact:
Scott Yessner
Interim Chief Financial Officer
Universal Technical Institute, Inc.
(623) 445-0977

Investor Relations Contact:
Moriah Shilton
LHA Investor Relations
(415) 433-3777
UTI@lhai.com

(Tables Follow)

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(UNAUDITED)




Three Months Ended June 30,


Nine Months Ended June 30,



2019


2018


2019


2018



(In thousands, except per share amounts)

Revenues


$

79,042



$

74,890



$

243,838



$

236,709


Operating expenses:









Educational services and facilities


42,836



44,737



134,393



134,635


Selling, general and administrative


36,661



41,953



122,685



126,298


Total operating expenses


79,497



86,690



257,078



260,933


Loss from operations


(455)



(11,800)



(13,240)



(24,224)


Other income (expense):









Interest expense, net


(444)



(474)



(1,271)



(1,405)


Equity in earnings of unconsolidated affiliate


100



96



298



289


Other income, net


465



307



1,121



635


Total other income (expense), net


121



(71)



148



(481)


Loss before income taxes


(334)



(11,871)



(13,092)



(24,705)


Income tax expense (benefit)


31



(158)



253



(3,024)


Net loss and comprehensive loss


$

(365)



$

(11,713)



$

(13,345)



$

(21,681)


Preferred stock dividends


1,309



1,309



3,927



3,927


Loss available for distribution


$

(1,674)



$

(13,022)



$

(17,272)



$

(25,608)











Loss per share:









Net loss per share - basic


$

(0.07)



$

(0.52)



$

(0.68)



$

(1.02)


Net loss per share - diluted


$

(0.07)



$

(0.52)



$

(0.68)



$

(1.02)


Weighted average number of shares outstanding:









Basic


25,498



25,186



25,410



25,084


Diluted


25,498



25,186



25,410



25,084


 

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)




June 30,
2019


September 30,
2018

Assets


(In thousands)

Current assets:





Cash and cash equivalents


$

42,689



$

58,104


Restricted cash


13,534



14,055


Receivables, net


12,032



21,106


Notes receivable, current portion


5,150



5,183


Prepaid expenses


8,997



10,320


Other current assets


7,402



8,027


Total current assets


89,804



116,795


Property and equipment, net


106,490



114,848


Goodwill


8,222



8,222


Notes receivable, less current portion


29,597



31,194


Other assets


9,978



11,219


Total assets


$

244,091



$

282,278







Liabilities and Shareholders' Equity





Current liabilities:





Accounts payable and accrued expenses


$

37,350



$

46,617


Deferred revenue


27,672



38,236


Accrued tool sets


2,920



2,397


Dividends payable


1,309




Financing obligation, current portion


1,493



1,319


Other current liabilities


3,242



3,893


Total current liabilities


73,986



92,462


Deferred tax liabilities, net


329



329


Deferred rent liability


9,927



12,003


Financing obligation


39,567



40,715


Other liabilities


9,555



10,124


Total liabilities


133,364



155,633







Commitments and contingencies










Shareholders' equity:





Common stock, $0.0001 par value, 100,000,000 shares authorized; 32,363,676 shares issued and 25,498,779 shares outstanding as of June 30, 2019 and 32,168,795 shares issued and 25,303,898 shares outstanding as of September 30, 2018


3



3


Preferred stock, $0.0001 par value, 10,000,000 shares authorized; 700,000 shares of Series A Convertible Preferred Stock issued and outstanding as of June 30, 2019 and September 30, 2018, liquidation preference of $100 per share





Paid-in capital - common


188,086



186,732


Paid-in capital - preferred


68,853



68,853


Treasury stock, at cost, 6,864,897 shares as of June 30, 2019 and September 30, 2018


(97,388)



(97,388)


Retained deficit


(48,827)



(31,555)


Total shareholders' equity


110,727



126,645


Total liabilities and shareholders' equity


$

244,091



$

282,278


 

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)




Nine Months Ended June 30,



2019


2018



(In thousands)

Cash flows from operating activities:





Net loss


$

(13,345)



$

(21,681)


Adjustments to reconcile net loss to net cash used in operating activities:





Depreciation and amortization


9,945



9,891


Amortization of assets subject to financing obligation


2,012



2,012


Goodwill and intangible asset impairment expense




1,164


Bad debt expense


887



1,191


Stock-based compensation


1,481



1,245


Deferred income taxes




(2,812)


Equity in earnings of unconsolidated affiliate


(298)



(289)


Training equipment credits earned, net


440



116


Other losses, net


143



71


Changes in assets and liabilities:





Receivables


3,795



173


Prepaid expenses


571



(1,342)


Other assets


1,270



(31)


Notes receivable


1,630



(421)


Accounts payable and accrued expenses


(3,793)



556


Deferred revenue


(10,564)



(15,491)


Income tax payable/receivable


198



(1,490)


Accrued tool sets and other current liabilities


441



507


Deferred rent liability


(2,076)



4,027


Other liabilities


139



148


Net cash used in operating activities


(7,124)



(22,456)


Cash flows from investing activities:





Purchase of property and equipment


(5,301)



(17,088)


Proceeds from disposal of property and equipment


8



9


Proceeds received upon maturity of investments




7,497


Purchase of trading securities




(894)


Capitalized costs for intangible assets




(325)


Proceeds from sales of trading securities




40,902


Return of capital contribution from unconsolidated affiliate


200



229


Net cash provided by (used in) investing activities


(5,093)



30,330


Cash flows from financing activities:





Payment of preferred stock cash dividend


(2,618)



(2,618)


Payment of financing obligation


(974)



(816)


Payment of payroll taxes on stock-based compensation through shares withheld


(127)



(13)


Net cash used in financing activities


(3,719)



(3,447)


Change in cash, cash equivalents and restricted cash:





Net (decrease) increase in cash, cash equivalents and restricted cash


(15,936)



4,427


Cash, cash equivalents and restricted cash, beginning of period


72,159



64,960


Cash, cash equivalents and restricted cash, end of period


$

56,223



$

69,387


 

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows.




June 30, 2019


June 30, 2018



(In thousands)

Cash and cash equivalents


$

42,689



$

55,968


Restricted cash


13,534



13,419


Total cash, cash equivalents and restricted cash shown in condensed consolidated statements of cash flows


$

56,223



$

69,387


 

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP FINANCIAL INFORMATION TO NON-GAAP FINANCIAL INFORMATION

(UNAUDITED)


Reconciliation of Net Loss to Adjusted EBITDA




Three Months Ended June 30,


Nine Months Ended June 30,



2019


2018


2019


2018



(In thousands)

Net loss, as reported


$

(365)



$

(11,713)



$

(13,345)



$

(21,681)


Interest expense, net


444



474



1,271



1,405


Income tax expense (benefit)


31



(158)



253



(3,024)


Depreciation and amortization


4,326



4,192



13,023



12,923


EBITDA


$

4,436



$

(7,205)



$

1,202



$

(10,377)











Non-recurring consulting fees for transformation initiative




1,573



4,224



4,135


Start-up costs associated with Bloomfield, NJ campus opening




1,760





2,939


Net restructuring charge for Norwood, MA campus exit


136





1,385




Norwood, MA campus operations


(83)



(91)



(205)



(402)


Adjusted EBITDA, non-GAAP


$

4,489



$

(3,963)



$

6,606



$

(3,705)




Reconciliation of Net Cash Used in Operating Activities to Adjusted Free Cash Flow




Nine Months Ended June 30,



2019


2018



(In thousands)

Net cash 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 Bloomfield, NJ campus opening




12,008


Cash outflow associated with Norwood, MA campus exit


1,308




Estimated free cash flow provided by Norwood, MA campus operations


(47)



(332)


Adjusted free cash flow, non-GAAP


$

(7,214)



$

(23,562)




Reconciliation of Loss from Operations to Adjusted Operating Loss





Three Months Ended June 30,


Nine Months Ended June 30,



2019


2018


2019


2018



(In thousands)

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 Bloomfield, NJ campus opening




1,775





2,958


Net restructuring charge for Norwood, MA campus exit


136





1,385




Norwood, MA campus operating loss


27



59



153



85


Adjusted operating loss, non-GAAP


$

(292)



$

(8,393)



$

(7,478)



$

(17,046)



(1)In October 2018, UTI terminated the agreement with the consultant and paid a termination fee of $3.95 million related to the transformation plan.  The consulting services covered marketing, admissions, future student processing, retention and cost savings initiatives. UTI determined that the company has developed sufficient expertise to execute transformation plan efforts internally. Total expense recognized during the nine months ended June 30, 2019, related to the consultant was $4.22 million.  During the three and nine months ended June 30, 2018, UTI also incurred $1.6 million and $4.1 million, respectively in fees to the same consultant as the company began the transformation plan.

 

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

SELECTED SUPPLEMENTAL INFORMATION

(UNAUDITED)


Selected Supplemental Financial Information




Three Months Ended June 30,


Nine Months Ended June 30,



2019


2018


2019


2018



(In thousands)

Salaries expense


$

32,705



$

34,879



$

103,145



$

103,779


Employee benefits and tax


7,735



7,168



23,213



22,869


Bonus expense


2,234



1,560



7,311



6,274


Stock-based compensation


169



145



1,531



1,295


Total compensation and related costs


$

42,843



$

43,752



$

135,200



$

134,217











Advertising


$

9,484



$

10,722



$

31,415



$

32,891


Contract and professional services expense


$

2,797



$

4,900



$

13,980



$

14,081


Depreciation and amortization


$

4,326



$

4,192



$

13,023



$

12,923


Goodwill and intangible asset impairment expense


$



$

1,164



$



$

1,164


Occupancy expense, net of subleases


$

8,869



$

9,672



$

27,209



$

28,396


Student expenses


$

532



$

458



$

1,792



$

1,089


Student training aids


$

142



$

806



$

653



$

1,918


 

Cision

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