Universal Technical Institute Reports Fiscal Year 2017 Third Quarter Results
SCOTTSDALE, Ariz., Aug. 3, 2017 /PRNewswire/ -- Universal Technical Institute, Inc. (NYSE: UTI), the leading provider of automotive technician training, reported financial results for the fiscal 2017 third quarter ended June 30, 2017.
Kim McWaters, UTI's Chairman and Chief Executive Officer, stated, "Third quarter student starts grew 12.5 percent and our show rate improved by 180 basis points over the prior year third quarter, as a combined result of our Show Rate Initiative and our Institutional Grant Program. In July, we opened our Welding technology program at our Rancho Cucamonga, CA campus, and in August, our first students will begin the CNC Machining technology program at our NASCAR Tech campus in Mooresville, NC. By expanding our core course offerings into these high-growth industries, we are further differentiating UTI among our peer group and positioning ourselves to capture additional market share.
"Looking ahead, we remain committed to achieving our goal of growing student starts for the second half of fiscal 2017, delivering annualized cost savings at the higher end of between $30 million and $40 million in fiscal 2017, and generating significantly improved EBITDA year-over-year. We are continuing to optimize our business model through the execution of our strategies to drive new student start growth, expand our course offerings, open additional smaller campuses, optimize our marketing mix, and maintain a prudent cost structure to support our path to long-term growth and profitability."
Financial Results for the Three-Month Period Ended June 30: 2017 Compared to 2016
-- Revenues for the quarter were $76.3 million, compared to $82.3 million
for the prior year period. Revenues exclude tuition related to students
participating in the company's proprietary loan program, which were $4.0
million and $4.2 million for the third fiscal quarter of 2017 and 2016,
respectively. This tuition will be recognized as revenues when payments
are received.
-- Operating expenses for the quarter were $79.0 million, compared to $87.7
million for the prior year period. The $8.7 million decrease is largely
due to lower compensation expense and improved operating efficiencies
pursuant to the implementation of the Financial Improvement Plan.
-- Operating loss for the quarter was $2.8 million, compared to $5.5
million for the prior year period. The improvement reflects the
aforementioned significant cost reductions and incremental operating
income of $1.1 million from the Long Beach campus, which opened in
August 2015.
-- Income tax expense was $1.0 million for the quarter, reflecting a full
valuation allowance on deferred tax assets, compared to an income tax
benefit of $1.1 million for the prior year period.
-- Net loss for the quarter was $3.9 million, compared to a net loss of
$5.1 million for the prior year period.
-- Net loss available for distribution to common shareholders was $5.2
million, or $0.21 per diluted share, for both the quarter and the prior
year period.
-- Earnings before interest, taxes, depreciation and amortization (EBITDA)
for the three months ended June 30, 2017 was $2.1 million, compared to a
loss of $0.6 million for the prior year period. (See "Use of Non-GAAP
Financial Information" below.)
Financial Results for the Nine-Month Period Ended June 30: 2017 Compared to 2016
-- Revenues were $242.9 million, compared to $260.2 million, and excluded
$13.4 million and $14.5 million, respectively, of tuition related to
students participating in the proprietary loan program.
-- Operating expenses were $243.6 million, compared to $273.6 million for
the prior year period.
-- Operating loss was $0.7 million, compared to $13.4 million for the prior
year period.
-- Income tax expense was $5.7 million for the year-to-date period,
compared to $23.7 million for the prior year period, reflecting a full
valuation allowance on deferred tax assets during both periods.
-- Net loss for the year-to-date period was $7.4 million, compared to a net
loss of $38.8 million for the prior year period.
-- Net loss available for distribution to common shareholders for the
year-to-date period was $11.3 million, or $0.46 per diluted share,
compared to $38.9 million, or $1.60 per diluted share, for the prior
year period.
-- UTI recorded a preferred stock cash dividend of $3.9 million for the
nine months ended June 30, 2017 in accordance with the company's Series
A Preferred Stock purchase agreement.
-- Cash, cash equivalents and investments totaled $84.5 million at June 30,
2017, compared to $120.7 million at September 30, 2016. The decrease was
primarily attributable to collateral requirements for surety bonds
renewed during the second quarter of fiscal 2017 and changes in working
capital.
-- EBITDA was $14.1 million, compared to $1.7 million for the prior year
period. (See "Use of Non-GAAP Financial Information" below.)
Student Metrics
Three Months Ended June 30, Nine Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
(Rounded to hundreds)
Total starts 1,800 1,600 5,000 5,700
Average undergraduate
full-time student
enrollment 10,000 11,100 10,900 12,200
End of period
undergraduate full-
time student
enrollment 9,500 10,300 9,500 10,300
Fiscal 2017 Outlook
-- UTI reaffirms its goal to grow student starts in the second half of
fiscal 2017. The company expects the majority of this growth will have
been reflected in the third quarter, and that its fourth quarter will
range from slightly up to slightly down. New student starts are now
expected to decline by mid-to-high single digits for the full year
versus previous guidance of a high single-digit decline in new student
starts.
-- Combined with the number of students currently in school and the timing
of the anticipated start growth, the average student population is
projected to be down in the low-double digits as a percentage compared
with the prior year.
-- UTI continues to expect revenue to be down in the mid-to-high single
digits in fiscal 2017.
-- UTI reaffirms its expectation that its Financial Improvement Plan
implemented in September 2016 will deliver annualized cost savings at
the higher end of between $30 million and $40 million in fiscal 2017.
-- UTI continues to expect annual operating results to range between
operating income of $1 million and an operating loss of $1 million. The
company is evaluating its institutional grant program and continuing to
invest in success-based marketing and show rate improvement initiatives;
each of these three factors could positively or negatively impact
year-end operating income.
-- UTI reaffirms previous expectations of significantly improved EBITDA for
fiscal 2017 as compared to the prior year.
-- Capital expenditures are now be approximately $10.5 million to $11.5
million for the 2017 fiscal year, versus previous guidance of $10.0
million to $11.0 million for the fiscal year, as the company expects to
invest in its second welding program and internally developed software
to support marketing.
Conference Call
Management will hold a conference call to discuss the 2017 third quarter results on Thursday, August 3rd 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 60 days or the replay can be accessed through August 15, 2017 by dialing 412-317-0088 or 877-344-7529 and entering pass code 10110803.
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 helps to identify underlying trends. Additionally, such measures help compare the Company's performance on a consistent basis across time periods. Management also utilizes EBITDA as a performance measure internally. To obtain a complete understanding of the Company's performance these measures should be examined in connection with net income (loss), 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 an alternative to net income as a measure of the Company's operating performance or profitability. 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 non-GAAP financial measures to the most directly comparable GAAP measures are included below.
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 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.
Headquartered in Scottsdale, Arizona, Universal Technical Institute, Inc. (NYSE: UTI) is the leading provider of post-secondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle and marine technicians. With more than 200,000 graduates in its 52-year history, UTI offers undergraduate degree and diploma programs at 12 campuses across the United States, as well as manufacturer-specific training programs at dedicated training centers. Through its campus-based school system, UTI provides specialized post-secondary education 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). For more information visit www.uti.edu.
Company Contact:
Bryce Peterson
Chief Financial Officer
Universal Technical Institute, Inc.
(623) 445-0993
Investor Relations Contact:
Becky Herrick/Kirsten Chapman
LHA Investor Relations
(415) 433-3777
UTI@lhai.com
(Tables Follow)
UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(UNAUDITED)
Three Months Ended June 30, Nine Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
(In thousands, except per share amounts)
Revenues $76,258 $82,266 $242,934 $260,231
Operating expenses:
Educational services and
facilities 44,120 47,044 136,108 146,466
Selling, general and
administrative 34,922 40,672 107,536 127,178
------ ------ ------- -------
Total operating expenses 79,042 87,716 243,644 273,644
------ ------ ------- -------
Loss from operations (2,784) (5,450) (710) (13,413)
Other income (expense):
Interest expense, net (559) (802) (2,020) (2,416)
Equity in earnings of
unconsolidated affiliates 116 51 369 290
Other income, net 277 77 712 455
--- --- --- ---
Total other expense, net (166) (674) (939) (1,671)
---- ---- ---- ------
Loss before income taxes (2,950) (6,124) (1,649) (15,084)
Income tax expense (benefit) 967 (1,055) 5,722 23,667
Net loss $(3,917) $(5,069) $(7,371) $(38,751)
======= ======= ======= ========
Preferred stock dividends 1,309 101 3,927 101
Loss available for distribution $(5,226) $(5,170) $(11,298) $(38,852)
======= ======= ======== ========
Loss per share:
Net loss per share - basic $(0.21) $(0.21) $(0.46) $(1.60)
Net loss per share - diluted $(0.21) $(0.21) $(0.46) $(1.60)
Weighted average number of shares
outstanding:
Basic 24,748 24,345 24,679 24,283
====== ====== ====== ======
Diluted 24,748 24,345 24,679 24,283
====== ====== ====== ======
Cash dividends declared per common
share $ - $ - $ - $0.04
=== === === === === === =====
UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
Three Months Ended June 30, Nine Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
(In thousands)
Net loss $(3,917) $(5,069) $(7,371) $(38,751)
Other comprehensive loss (net of
tax):
Equity interest in investee's
unrealized losses on hedging
derivatives, net of taxes (7) - (16) (1)
--- --- --- ---
Comprehensive loss $(3,924) $(5,069) $(7,387) $(38,752)
======= ======= ======= ========
UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 2017 Sept. 30, 2016
------------- --------------
(In thousands)
Assets
Current
assets:
119,045
Cash and cash
equivalents $35,077 $
Restricted
cash 13,598 5,956
Trading
securities 39,790 -
Held-to-
maturity
investments,
current
portion 9,398 1,691
Receivables,
net 10,091 15,253
Prepaid
expenses and
other
current
assets 19,618 20,004
------ ------
Total current
assets 127,572 161,949
Held-to-
maturity
investments,
less current
portion 251 -
Property and
equipment,
net 108,452 114,033
Goodwill 9,005 9,005
Other assets 11,492 12,172
Total assets $256,772 $297,159
======== ========
Liabilities
and
Shareholders'
Equity
Current
liabilities:
42,545
Accounts
payable and
accrued
expenses $31,336 $
Deferred
revenue 25,040 44,491
Accrued tool
sets 2,920 2,938
Dividends
payable 1,309 -
Financing
obligation,
current 1,056 913
Income tax
payable 845 -
Other current
liabilities 4,099 3,673
----- -----
Total current
liabilities 66,605 94,560
Deferred tax
liabilities,
net 3,141 3,141
Deferred rent
liability 7,365 8,987
Financing
obligation 42,325 43,141
Other
liabilities 10,021 10,716
Total
liabilities 129,457 160,545
------- -------
Commitments
and
contingencies
Shareholders'
equity:
Common stock,
$0.0001 par outstanding
value, as of June
100,000,000 30, 2017 and
shares 31,489,331
authorized, shares
31,622,731 issued and
shares 24,624,434
issued and shares
24,757,834 outstanding
shares 3 3
Preferred
stock, Preferred
$0.0001 par Stock issued
value, and
10,000,000 outstanding
shares as of June
authorized; 30, 2017 and
700,000 September
shares of 30, 2016,
Series A liquidation
Convertible - -
Paid-in
capital -
common 184,597 182,615
Paid-in
capital -
preferred 68,853 68,820
Treasury
stock, at
cost,
6,864,897
shares as of
June 30,
2017 and
September
30, 2016 (97,388 (97,388
Retained
deficit (28,752 (17,454
Accumulated
other
comprehensive
income 2 18
--- ---
Total
shareholders'
equity 127,315 136,614
297,159
Total
liabilities
and
shareholders'
equity $256,772 $
========
UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended June 30,
2017 2016
---- ----
(In thousands)
Cash flows from operating activities:
Net loss $(7,371) $(38,751)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 10,726 11,358
Amortization of assets subject to
financing obligation 2,012 2,012
Amortization of discount on investments 32 387
Unrealized gains on trading securities (10) -
Bad debt expense 503 931
Stock-based compensation 1,992 3,208
Deferred income taxes - 27,928
Equity in earnings of unconsolidated
affiliates (369) (290)
Training equipment credits earned, net (710) (716)
Loss on disposal of property and
equipment 18 89
Changes in assets and liabilities:
Restricted cash (11,050) 322
Receivables 2,453 11,221
Prepaid expenses and other current
assets 358 (1,535)
Other assets 263 (83)
Accounts payable and accrued expenses (11,359) (3,217)
Deferred revenue (19,451) (17,358)
Income tax payable/receivable 3,052 (5,973)
Accrued tool sets and other current
liabilities 768 359
Deferred rent liability (1,622) (1,372)
Other liabilities (70) 648
--- ---
Net cash used in operating activities (29,835) (10,832)
------- -------
Cash flows from investing activities:
Purchase of property and equipment (6,497) (6,695)
Proceeds from disposal of property and
equipment 1 20
Purchase of held-to-maturity investments (9,671) -
Proceeds received upon maturity of
investments 1,687 24,569
Purchase of trading securities (41,585) -
Proceeds from sales of trading
securities 1,799 -
Acquisitions - (1,500)
Investment in unconsolidated affiliates - (1,000)
Capitalized costs for intangible assets (325) (575)
Return of capital contribution from
unconsolidated affiliate 352 359
Restricted cash: other 3,407 2,258
----- -----
Net cash provided by (used in) investing
activities (50,832) 17,436
------- ------
Cash flows from financing activities:
Proceeds from sale of preferred stock,
net of issuance costs paid - 69,214
Payment of common stock cash dividends - (1,457)
Payment of preferred stock cash dividend (2,618) -
Payment of financing obligation (673) (542)
Payment of payroll taxes on stock-based
compensation through shares withheld (10) (12)
Net cash provided by (used in) financing
activities (3,301) 67,203
------ ------
Net increase (decrease) in cash and cash
equivalents (83,968) 73,807
Cash and cash equivalents, beginning of
period 119,045 29,438
------- ------
Cash and cash equivalents, end of period $35,077 $103,245
======= ========
UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP FINANCIAL INFORMATION TO NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
Reconciliation of Net Loss to EBITDA
Three Months Ended June 30, Nine Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
(In thousands)
Net loss $(3,917) $(5,069) $(7,371) $(38,751)
Interest expense, net 559 802 2,020 2,416
Income tax expense
(benefit) 967 (1,055) 5,722 23,667
Depreciation and
amortization 4,537 4,745 13,698 14,370
----- ----- ------ ------
EBITDA $2,146 $(577) $14,069 $1,702
====== ===== ======= ======
UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
SELECTED SUPPLEMENTAL INFORMATION
(UNAUDITED)
Selected Supplemental Financial Information
Three Months Ended June 30, Nine Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
(In thousands)
Salaries expense $33,692 $39,182 $104,416 $118,360
Employee benefits and tax 7,697 8,431 22,465 25,453
Bonus expense 830 2,223 2,910 4,890
Stock-based compensation 557 921 2,042 3,207
Total compensation and
related costs $42,776 $50,757 $131,833 $151,910
------- ------- -------- --------
Occupancy expense $9,422 $9,497 $28,455 $28,819
Depreciation and amortization
expense $4,537 $4,745 $13,698 $14,370
Bad debt expense $176 $179 $503 $931
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SOURCE Universal Technical Institute, Inc.
