Universal Technical Institute Reports Record Revenue of $107.5 Million, Net Income of $6.3 Million and Student Start Growth of 35% for Third Quarter 2010
PHOENIX, Aug. 3, 2010 -- Universal Technical Institute, Inc. , the leading provider of automotive technician training, reported results for the third quarter ended June 30, 2010. Revenues for the third quarter ended June 30, 2010 were $107.5 million, a 22.4 percent increase from $87.9 million for the third quarter of the prior year. Net income for the third quarter ended June 30, 2010 was $6.3 million, or 25 cents per diluted share, as compared to net income of $1.9 million, or 8 cents per diluted share, for the third quarter of the prior year.
Return on equity(1) for the trailing four quarters ended June 30, 2010 was 26.4 percent compared to 11.3 percent for the trailing four quarters ended Sept. 30, 2009.
"This was an exciting quarter for UTI as we opened our eleventh campus and launched our new blended learning curriculum," said Kimberly McWaters, president and chief executive officer. "It was a solid quarter of record revenues, 20 percent growth in average enrollment and 35 percent growth in students starting school in the third quarter."
Student Metrics
Three Months Nine Months
Ended Ended
June 30, June 30,
--------
2010 2009 2010 2009
---- ---- ---- ----
(rounded to hundreds)
Total starts 4,000 2,900 12,000 9,600
Average undergraduate full-
time student enrollment 17,900 14,800 18,300 15,500
End of period undergraduate
full-time student
enrollment 17,600 14,300 17,600 14,300
(1) Return on equity is calculated as the sum of net income for the trailing four quarters divided by the average of the trailing five quarters total shareholders' equity balances.
Third Quarter Operating Performance
For the third quarter of fiscal 2010, revenues were $107.5 million, a 22.4 percent increase from $87.9 million for last year's third quarter. The increase in revenues primarily relates to an increase in average undergraduate full-time student enrollment and an increase in tuition rates. During the third quarter of fiscal 2010 and 2009, tuition revenue recognized by the Company did not include $2.4 million and $2.5 million, respectively, because that portion of student's tuition was funded by the Company's proprietary loan program. These amounts will be recognized when collected. Additionally, there was a decrease in revenue from the industry training programs.
Educational services and facilities expense increased $6.4 million, or 13.5 percent to $53.7 million for the three months ended June 30, 2010, from $47.3 million in the three months ended June 30, 2009. This increase was due to higher compensation and benefits expense related to an increase in the number of instructors and employees in the financial aid and other student support departments to support the needs of the growing student population.
Selling, general and administrative expense increased $6.4 million, or 17.0 percent to $44.0 million for the three months ended June 30, 2010, from $37.6 million for the three months ended June 30, 2009. The increase was due to an increase in advertising expense and an increase in compensation and benefits expense related to the increase in sales force representatives and employees to support the growth in average undergraduate student enrollment.
Operating income and margin for the third quarter of fiscal 2010 was $9.9 million and 9.2 percent, respectively, compared to operating income and margin of $3.0 million and 3.4 percent, respectively, in the same period last year.
Earnings before interest, tax, depreciation and amortization (EBITDA) for the third quarter of fiscal 2010 was $14.9 million compared to $7.5 million in the same period last year. See "Use of Non-GAAP Financial Information" below.
Nine Month Operating Performance
Revenues for the nine months ended June 30, 2010 were $316.7 million, an 18.6 percent increase from $267.1 million for the nine months ended June 30, 2009.
Operating income and margin for the nine months ended June 30, 2010 were $34.8 million and 11.0 percent, respectively, compared to operating income and margin of $6.4 million and 2.4 percent, respectively, for the nine months ended June 30, 2009. The increase is related to the increase in revenues, partially offset by increases in compensation and benefits and advertising expense.
Net income for the nine months ended June 30, 2010 was $21.6 million, or 88 cents per diluted share, as compared to net income of $4.1 million, or 17 cents per diluted share, for the nine months ended June 30, 2009.
Earnings before interest, tax, depreciation and amortization (EBITDA) for the nine months ended June 30, 2010 was $49.4 million compared to $20.3 million for the nine months ended June 30, 2009. See "Use of Non-GAAP Financial Information" below.
Liquidity
Cash, cash equivalents and investments totaled $98.8 million at June 30, 2010, compared to $85.1 million at Sept. 30, 2009. At June 30, 2010, shareholders' equity totaled $100.5 million as compared to $106.7 million at Sept. 30, 2009. The board of directors declared a special cash dividend on UTI common stock of $1.50 per share on June 8, 2010 which totaled $36.3 million and was paid on July 16, 2010 to common shareholders of record as of July 6, 2010.
Cash flow provided by operations was $37.6 million for the nine months ended June 30, 2010, compared with $18.5 million for the nine months ended June 30, 2009. This increase is primarily attributable to the increase in net income and an increase in deferred revenue, partially offset by an increase in receivables and the timing of income tax payments.
Proprietary Loan Program
There is $30 million of credit currently authorized under the proprietary loan program. As of June 30, 2010, UTI had committed to provide loans to students for approximately $23.6 million and of that amount there was approximately $20.3 million in loans outstanding. At June 30, 2009, there was approximately $11.0 million in loans outstanding. Since the inception of the program, tuition revenue recognized by the Company did not include $16.4 million through June 30, 2010 and $6.4 million through June 30, 2009 because that portion of the student's tuition was funded by the proprietary loan program. These amounts will be recognized when collected.
New UTI Dallas/Ft. Worth Campus
On June 21, 2010, UTI opened a new campus in Dallas/Ft. Worth, Texas with its first class of 96 students. Approximately $16.0 million has been invested in the building and land purchase, building improvements and equipment through June 30, 2010, with approximately $6.8 million of that investment occurring during the nine months ended June 30, 2010. Costs related to the start up of this campus are expensed as incurred. The Company incurred approximately $2.4 million and $4.0 million in operating expenses during the three months and nine months ended June 30, 2010, respectively, related to the opening of the campus. The Company anticipates incurring approximately $7.0 million in total during 2010 and that this campus will become profitable within 9 to 15 months.
Conference Call
Management will hold a conference call to discuss the fiscal 2010 third quarter results today at 2:00 p.m. PDT (5:00 p.m. EDT). This call can be accessed by dialing 412-858-4600 or 800-860-2442. Investors are invited to listen to the call live at http://uti.investorroom.com/. Please access the web site at least 15 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 Web site for 60 days or the replay can be accessed through August 11, 2010 by dialing 412-317-0088 or 877-344-7529 and entering pass code 442530#.
Safe Harbor Statement
All statements contained herein, other than statements of historical fact, are "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. 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 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 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.
Use of Non-GAAP Financial Information
This press release and the related conference call contains the non-GAAP (Generally Accepted Accounting Principles) financial measure EBITDA, which is intended to supplement, but not substitute for, the most directly comparable GAAP measure. Management chooses to disclose to investors, this non-GAAP financial measure because it provides an additional analytical tool to clarify the results from operations and helps to identify underlying trends. Additionally, such measure helps compare the Company's performance on a consistent basis across time periods. To obtain a complete understanding of the Company's performance this measure should be examined in connection with net income, 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 this measure are significant components in understanding and assessing financial performance under GAAP, this measure should not be considered to be 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 measure to the most directly comparable GAAP measure is included below.
About Universal Technical Institute, Inc.
Headquartered in Phoenix, Arizona, Universal Technical Institute, Inc. is the leading provider of post-secondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle and marine technicians. During the past 45 years, UTI has graduated more than 130,000 students. The organization offers undergraduate degree, diploma and certificate programs at 11 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 (NTI).
For more information about Universal Technical Institute, Inc. and its training programs, visit www.uti.edu.
(Tables Follow)
UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
Three Months Ended
June 30,
--------
2010 2009
---- ----
(In thousands, except per share amounts)
Revenues $107,525 $87,852
Operating expenses:
Educational services and
facilities 53,712 47,307
Selling, general and
administrative 43,956 37,579
------ ------
Total operating expenses 97,668 84,886
------ ------
Income from operations 9,857 2,966
----- -----
Other income:
Interest income 80 43
Interest expense (3) (16)
Other income 105 64
--- ---
Total other income 182 91
--- ---
Income before income taxes 10,039 3,057
Income tax expense 3,753 1,134
----- -----
Net income $6,286 $1,923
====== ======
Earnings per share:
Net income per share - basic $0.26 $0.08
===== =====
Net income per share - diluted $0.25 $0.08
===== =====
Weighted average number of shares
outstanding:
Basic 24,146 23,626
====== ======
Diluted 24,730 23,953
====== ======
Special cash dividend declared
per common share $1.50 -
===== ===
Nine Months Ended
June 30,
--------
2010 2009
---- ----
(In thousands, except per share amounts)
Revenues $316,678 $267,098
Operating expenses:
Educational services and
facilities 154,232 143,947
Selling, general and
administrative 127,649 116,799
------- -------
Total operating expenses 281,881 260,746
------- -------
Income from operations 34,797 6,352
------ -----
Other income:
Interest income 202 181
Interest expense (7) (37)
Other income 356 207
--- ---
Total other income 551 351
--- ---
Income before income taxes 35,348 6,703
Income tax expense 13,736 2,556
------ -----
Net income $21,612 $4,147
======= ======
Earnings per share:
Net income per share - basic $0.90 $0.17
===== =====
Net income per share - diluted $0.88 $0.17
===== =====
Weighted average number of shares
outstanding:
Basic 23,976 24,451
====== ======
Diluted 24,511 24,836
====== ======
Special cash dividend declared
per common share $1.50 -
===== ===
UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September
June 30, 30,
2010 2009
---- ----
($'s in thousands)
Assets
Current assets:
Cash and cash equivalents $59,034 $56,199
Investments, current portion 33,027 25,142
Receivables, net 19,143 14,892
Deferred tax assets 8,153 7,452
Prepaid expenses and other current
assets 10,935 10,480
------ ------
Total current assets 130,292 114,165
Investments, less current portion 6,722 3,806
Property and equipment, net 94,547 81,168
Goodwill 20,579 20,579
Other assets 3,561 3,633
----- -----
Total assets $255,701 $223,351
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses $47,333 $47,276
Dividends payable 36,333 -
Deferred revenue 53,901 48,175
Accrued tool sets 5,092 4,276
Income tax payable - 1,794
Other current liabilities 21 25
--- ---
Total current liabilities 142,680 101,546
Deferred tax liabilities 1,638 3,086
Deferred rent liability 5,512 5,593
Other liabilities 5,415 6,428
----- -----
Total liabilities 155,245 116,653
------- -------
Commitments and contingencies
Shareholders' equity:
Common stock, $0.0001 par value,
100,000,000 shares authorized,
29,085,590 shares issued and 24,215,364
shares outstanding at June 30, 2010 and
28,641,006 shares issued and 23,770,780
shares outstanding at September 30, 2009 3 3
Preferred stock, $0.0001 par value,
10,000,000 shares authorized,
0 shares issued and outstanding - -
Paid-in capital 149,292 140,813
Treasury stock, at cost, 4,870,226
shares at June 30, 2010
and September 30, 2009 (76,506) (76,506)
Retained earnings 27,667 42,388
------ ------
Total shareholders' equity 100,456 106,698
------- -------
Total liabilities and shareholders'
equity $255,701 $223,351
======== ========
UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
June 30,
--------
2010 2009
---- ----
(In thousands)
Cash flows from operating activities:
Net income $21,612 $4,147
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 13,559 13,092
Amortization of held-to-maturity
investments 1,133 -
Bad debt expense 4,583 5,048
Stock-based compensation 4,690 3,630
Excess tax benefit from stock-based
compensation (1,786) (195)
Deferred income taxes (2,149) (3,370)
Loss on disposal of property and equipment 160 727
Changes in assets and liabilities:
Receivables (6,821) 2,439
Prepaid expenses and other current assets (752) (650)
Other assets 36 128
Accounts payable and accrued expenses (813) 1,441
Deferred revenue 5,726 (8,067)
Income tax receivable (1,999) (473)
Accrued tool sets and other current
liabilities 812 422
Other liabilities (379) 143
---- ---
Net cash provided by operating activities 37,612 18,462
------ ------
Cash flows from investing activities:
Purchase of property and equipment (26,555) (14,411)
Proceeds from disposal of property and
equipment 1 35
Purchase of investments (33,702) (17,287)
Proceeds received upon maturity of
investments 21,382 -
------ ---
Net cash used in investing activities (38,874) (31,663)
------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock
under employee plans 3,917 261
Payment of payroll taxes on stock-based
compensation through shares withheld (1,606) (1,049)
Excess tax benefit from stock-based
compensation 1,786 195
Purchase of treasury stock - (16,935)
--- -------
Net cash provided by (used in) financing
activities 4,097 (17,528)
----- -------
Net increase (decrease) in cash and cash
equivalents 2,835 (30,729)
Cash and cash equivalents, beginning of
period 56,199 80,878
------ ------
Cash and cash equivalents, end of period $59,034 $50,149
======= =======
UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP FINANCIAL INFORMATION TO NON-GAAP FINANCIAL
INFORMATION
(UNAUDITED)
Three Months Ended
June 30,
--------
2010 2009
---- ----
($'s in thousands)
Net income $6,286 $1,923
Interest income, net (77) (27)
Income tax expense 3,753 1,134
Depreciation and
amortization 4,934 4,510
----- -----
EBITDA $14,896 $7,540
======= ======
Nine Months Ended
June 30,
2010 2009
---- ----
($'s in thousands)
Net income $21,612 $4,147
Interest income, net (195) (144)
Income tax expense 13,736 2,556
Depreciation and
amortization 14,254 13,695
------ ------
EBITDA $49,407 $20,254
======= =======