Form 8-K UNIVERSAL TECHNICAL INST For: May 03
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): | May 3, 2018 | |
Universal Technical Institute, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)
Delaware | 1-31923 | 86-0226984 |
_____________________ (State or other jurisdiction | _____________ (Commission | ______________ (I.R.S. Employer |
of incorporation) | File Number) | Identification No.) |
16220 North Scottsdale Road, Suite 100, Scottsdale, Arizona | 85254 | |
_________________________________ (Address of principal executive offices) | ___________ (Zip Code) | |
Registrant’s telephone number, including area code: | 623-445-9500 | |
Not Applicable
______________________________________________
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 Results of Operations and Financial Condition.
On May 3, 2018, Universal Technical Institute, Inc. (the "Company") issued a press release reporting second quarter results for fiscal 2018. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated into this Item 2.02 by reference.
In accordance with General Instruction B.2 to Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. | Description | |
Press Release of Universal Technical Institute, Inc., dated May 3, 2018 | ||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Universal Technical Institute, Inc. | ||||
May 3, 2018 | By: | /s/ Bryce H. Peterson | ||
Name: Bryce H. Peterson | ||||
Title: Chief Financial Officer | ||||
Universal Technical Institute Reports Fiscal Year 2018 Second Quarter Results
- Reaffirms Guidance for 2018 Start Growth -
- On Track for Bloomfield Campus to Open in Fall 2018 -
SCOTTSDALE, ARIZ. - May 3, 2018 - Universal Technical Institute, Inc. (NYSE: UTI), the leading provider of transportation technician training, reported financial results for the fiscal 2018 second quarter ended March 31, 2018.
Kim McWaters, UTI’s President and Chief Executive Officer, stated, “In the second quarter of 2018, we demonstrated good traction on leading indicators for our business, as we generated a greater number of higher converting inquiries and increased enrollment applications by seven percent as compared to 2017. We are now in the initial implementation phases of the Transformation Plan announced in March and expect to see a positive impact on our operational results starting in the fourth quarter. We remain on track to open our third metro campus in Bloomfield, NJ, and community, employer and prospective student response has been overwhelmingly positive. Both the Transformation Plan and our new campus represent significant investment in the long-term profitable growth of UTI, with positive financial benefits beginning in fiscal 2019.”
Financial Results for the Three-Month Period Ended March 31: 2018 Compared to 2017
• | Revenues for the quarter were $80.7 million, compared to $82.5 million for the prior year period. The year-over-year revenue variance was primarily attributable to a 4.4% decrease in UTI’s average student population. |
• | Operating expenses for the quarter were $89.5 million, compared to $81.8 million for the prior year period. The increase was primarily attributable to planned increases in compensation costs, which were largely a result of our graduate-based compensation program for our admissions representatives, contract services, and advertising expense; these increases were all aligned with our previously announced strategic growth transformation. |
• | Operating loss for the quarter was $8.8 million compared to operating income of $0.7 million for the prior year period. |
• | Net loss for the quarter was $8.8 million, compared to $1.7 million for the prior year period. |
• | Loss available for distribution to common shareholders was $10.1 million, or $0.40 per diluted share, compared to $3.0 million, or $0.12 per diluted share for the prior year period. |
• | Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) for the three months ended March 31, 2018 was $(4.0) million, compared to $5.6 million for the prior year period. (See “Use of Non-GAAP Financial Information” below.) |
Financial Results for the Six-Month Period Ended March 31: 2018 Compared to 2017
• | Revenues were $161.8 million, compared to $166.7 million for the prior year period. The year-over-year revenue variance was attributable to a 5.2% decrease in UTI’s average student population. |
• | Operating expenses were $174.2 million, compared to $164.6 million for the prior year period. The increase was primarily attributable to planned increases in contract services, advertising, graduate based admissions compensation, and professional accounting service expenses. |
• | Operating loss was $12.4 million compared to operating income of $2.1 million for the prior year period. |
• | Income tax benefit was $2.9 million, compared to an income tax expense of $4.8 million for the prior year period. The current period benefit was primarily a result of the Tax Cuts and Jobs Act, which was enacted in December 2017, as well as the loss before taxes during the quarter. |
• | Net loss was $10.0 million, compared to $3.5 million for the prior year period. |
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• | Loss available for distribution to common shareholders was $12.6 million, or $0.50 per diluted share, compared to $6.1 million, or $0.25 per diluted share for the prior year period. |
• | Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) for the six months ended March 31, 2018 was $(3.2) million, compared to $11.9 million for the prior year period. (See “Use of Non-GAAP Financial Information” below.) |
• | Our early adoption of the new accounting standard on revenue recognition resulted in a non-cash increase to equity of approximately $37.2 million as of October 1, 2017. |
Student Metrics
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Total starts | 1,819 | 1,869 | 3,135 | 3,249 | |||||||
Average undergraduate full-time student enrollment | 10,394 | 10,876 | 10,823 | 11,420 | |||||||
End of period undergraduate full-time student enrollment | 10,005 | 10,261 | 10,005 | 10,261 | |||||||
Fiscal 2018 Outlook
• | Student starts are still expected to grow in the low-single digits. |
• | Average student population is still expected to be down in the mid-single digits. |
• | Revenue is still expected to range between $310 million and $320 million. |
• | Operating expenses are still expected to range between $348 million and $353 million. |
• | An operating loss is still expected between $28 million and $33 million. |
• | EBITDA is still expected to be negative. |
• | Capital expenditures are still expected to be between $24 million and $25 million. |
Conference Call
Management will hold a conference call to discuss the 2018 second quarter results on Thursday, May 3rd at 1:30 p.m. PST (4:30 p.m. EST). 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 May 15, 2018 by dialing 412-317-0088 or 877-344-7529 and entering pass code 10119697.
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.
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About Universal Technical Institute, Inc.
With more than 200,000 graduates in its 52-year history, Universal Technical Institute, Inc. (NYSE: 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 12 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:
Bryce Peterson
Chief Financial Officer
Universal Technical Institute, Inc.
(623) 445-0993
Investor Relations Contact:
Kirsten Chapman
LHA Investor Relations
(415) 433-3777
(Tables Follow)
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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(UNAUDITED)
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||
Revenues | $ | 80,663 | $ | 82,497 | $ | 161,819 | $ | 166,676 | ||||||||
Operating expenses: | ||||||||||||||||
Educational services and facilities | 45,817 | 44,834 | 89,898 | 91,988 | ||||||||||||
Selling, general and administrative | 43,666 | 36,976 | 84,345 | 72,614 | ||||||||||||
Total operating expenses | 89,483 | 81,810 | 174,243 | 164,602 | ||||||||||||
Income (loss) from operations | (8,820 | ) | 687 | (12,424 | ) | 2,074 | ||||||||||
Other income (expense): | ||||||||||||||||
Interest expense, net | (500 | ) | (712 | ) | (931 | ) | (1,461 | ) | ||||||||
Equity in earnings of unconsolidated affiliate | 96 | 125 | 193 | 253 | ||||||||||||
Other income, net | 354 | 315 | 328 | 435 | ||||||||||||
Total other expense, net | (50 | ) | (272 | ) | (410 | ) | (773 | ) | ||||||||
Income (loss) before income taxes | (8,870 | ) | 415 | (12,834 | ) | 1,301 | ||||||||||
Income tax expense (benefit) | (37 | ) | 2,145 | (2,866 | ) | 4,755 | ||||||||||
Net loss | $ | (8,833 | ) | $ | (1,730 | ) | $ | (9,968 | ) | $ | (3,454 | ) | ||||
Preferred stock dividends | 1,295 | 1,295 | 2,618 | 2,618 | ||||||||||||
Loss available for distribution | $ | (10,128 | ) | $ | (3,025 | ) | $ | (12,586 | ) | $ | (6,072 | ) | ||||
Loss per share: | ||||||||||||||||
Net loss per share - basic | $ | (0.40 | ) | $ | (0.12 | ) | $ | (0.50 | ) | $ | (0.25 | ) | ||||
Net loss per share - diluted | $ | (0.40 | ) | $ | (0.12 | ) | $ | (0.50 | ) | $ | (0.25 | ) | ||||
Weighted average number of shares outstanding: | ||||||||||||||||
Basic | 25,057 | 24,666 | 25,032 | 24,645 | ||||||||||||
Diluted | 25,057 | 24,666 | 25,032 | 24,645 | ||||||||||||
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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, 2018 | Sept. 30, 2017 | |||||||
Assets | (In thousands) | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 82,245 | $ | 50,138 | ||||
Restricted cash | 13,081 | 14,822 | ||||||
Trading securities | — | 40,020 | ||||||
Held-to-maturity investments | 701 | 7,759 | ||||||
Receivables, net | 12,284 | 15,197 | ||||||
Notes receivable, current portion | 5,098 | — | ||||||
Prepaid expenses and other current assets | 20,499 | 18,890 | ||||||
Total current assets | 133,908 | 146,826 | ||||||
Property and equipment, net | 109,163 | 106,664 | ||||||
Goodwill | 9,005 | 9,005 | ||||||
Notes receivable, less current portion | 33,702 | — | ||||||
Other assets | 11,409 | 11,607 | ||||||
Total assets | $ | 297,187 | $ | 274,102 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 44,300 | $ | 37,481 | ||||
Deferred revenue | 35,590 | 41,338 | ||||||
Accrued tool sets | 2,774 | 2,764 | ||||||
Financing obligation, current portion | 1,210 | 1,106 | ||||||
Income tax payable | — | 490 | ||||||
Other current liabilities | 3,418 | 3,210 | ||||||
Total current liabilities | 87,292 | 86,389 | ||||||
Deferred tax liabilities, net | 329 | 3,141 | ||||||
Deferred rent liability | 6,587 | 6,887 | ||||||
Financing obligation | 41,395 | 42,035 | ||||||
Other liabilities | 10,096 | 9,874 | ||||||
Total liabilities | 145,699 | 148,326 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ equity: | ||||||||
Common stock, $0.0001 par value, 100,000,000 shares authorized, 32,050,371 shares issued and 25,185,474 shares outstanding as of March 31, 2018 and 31,872,433 shares issued and 25,007,536 shares outstanding as of September 30, 2017 | 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 March 31, 2018 and September 30, 2017, liquidation preference of $100 per share | — | — | ||||||
Paid-in capital - common | 186,229 | 185,140 | ||||||
Paid-in capital - preferred | 68,853 | 68,853 | ||||||
Treasury stock, at cost, 6,864,897 shares as of March 31, 2018 and September 30, 2017 | (97,388 | ) | (97,388 | ) | ||||
Retained earnings (deficit) | (6,209 | ) | (30,832 | ) | ||||
Total shareholders’ equity | 151,488 | 125,776 | ||||||
Total liabilities and shareholders’ equity | $ | 297,187 | $ | 274,102 | ||||
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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
(In thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (9,968 | ) | $ | (3,454 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 6,713 | 7,172 | ||||||
Amortization of assets subject to financing obligation | 1,341 | 1,341 | ||||||
Bad debt expense | 738 | 327 | ||||||
Stock-based compensation | 1,100 | 1,435 | ||||||
Deferred income taxes | (2,812 | ) | — | |||||
Equity in earnings of unconsolidated affiliates | (193 | ) | (253 | ) | ||||
Training equipment credits earned, net | 2 | (409 | ) | |||||
Other gains, net | 91 | 6 | ||||||
Changes in assets and liabilities: | ||||||||
Restricted cash | 121 | (11,102 | ) | |||||
Receivables | 3,552 | 2,748 | ||||||
Prepaid expenses and other assets | (2,117 | ) | (426 | ) | ||||
Notes receivable | (1,591 | ) | — | |||||
Accounts payable and accrued expenses | 4,539 | (7,881 | ) | |||||
Deferred revenue | (5,748 | ) | (9,144 | ) | ||||
Income tax payable/receivable | (1,866 | ) | 2,634 | |||||
Accrued tool sets and other current liabilities | 438 | 574 | ||||||
Deferred rent liability | (300 | ) | (973 | ) | ||||
Other liabilities | 9 | (229 | ) | |||||
Net cash used in operating activities | (5,951 | ) | (17,634 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (7,613 | ) | (3,929 | ) | ||||
Proceeds from disposal of property and equipment | 1 | 1 | ||||||
Proceeds received upon maturity of investments | 7,043 | 1,642 | ||||||
Purchase of trading securities | (894 | ) | — | |||||
Proceeds from sales of trading securities | 40,902 | — | ||||||
Return of capital contribution from unconsolidated affiliate | 165 | 241 | ||||||
Restricted cash: other | 1,619 | 2,355 | ||||||
Net cash provided by (used in) investing activities | 41,223 | (9,361 | ) | |||||
Cash flows from financing activities: | ||||||||
Payment of preferred stock cash dividend | (2,618 | ) | (2,618 | ) | ||||
Payment of financing obligation | (536 | ) | (441 | ) | ||||
Payment of payroll taxes on stock-based compensation through shares withheld | (11 | ) | (7 | ) | ||||
Net cash used in financing activities | (3,165 | ) | (3,066 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 32,107 | (30,061 | ) | |||||
Cash and cash equivalents, beginning of period | 50,138 | 119,045 | ||||||
Cash and cash equivalents, end of period | $ | 82,245 | $ | 88,984 | ||||
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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 March 31, | Six Months Ended March 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(In thousands) | ||||||||||||||||
Net loss | $ | (8,833 | ) | $ | (1,730 | ) | $ | (9,968 | ) | $ | (3,454 | ) | ||||
Interest expense, net | 500 | 712 | 931 | 1,461 | ||||||||||||
Income tax expense (benefit) | (37 | ) | 2,145 | (2,866 | ) | 4,755 | ||||||||||
Depreciation and amortization | 4,355 | 4,522 | 8,731 | 9,161 | ||||||||||||
EBITDA | $ | (4,015 | ) | $ | 5,649 | $ | (3,172 | ) | $ | 11,923 | ||||||
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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
SELECTED SUPPLEMENTAL INFORMATION
(UNAUDITED)
Selected Supplemental Financial Information
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(In thousands) | ||||||||||||||||
Salaries expense | $ | 34,864 | $ | 34,928 | $ | 68,900 | $ | 70,724 | ||||||||
Employee benefits and tax | 8,322 | 7,264 | 15,701 | 14,768 | ||||||||||||
Bonus expense | 2,952 | 295 | 4,714 | 2,081 | ||||||||||||
Stock-based compensation | 791 | 937 | 1,150 | 1,485 | ||||||||||||
Total compensation and related costs | $ | 46,929 | $ | 43,424 | $ | 90,465 | $ | 89,058 | ||||||||
Occupancy expense, net of subleases | $ | 9,503 | $ | 9,379 | $ | 18,724 | $ | 18,842 | ||||||||
Depreciation and amortization expense | $ | 4,355 | $ | 4,522 | $ | 8,731 | $ | 9,161 | ||||||||
Bad debt expense | $ | 400 | $ | 78 | $ | 738 | $ | 327 | ||||||||
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