Universal Technical Institute (NYSE: UTI) reported Q2 EPS of ($0.26), $0.09 worse than the analyst estimate of ($0.17). Revenue for the quarter came in at $81.7 million versus the consensus estimate of $81.6 million.

Financial Results for the Three-Month Period Ended March 31 2019 Compared to 2018

• Revenues increased 1.3% to $81.7 million, driven by higher average full-time enrollment. The increase occurred despite one less earning day compared to the prior year period.
• Operating expenses decreased by 2.4% to $87.3 million, primarily due to lower compensation and related costs and contract and professional services expense. This decline was partially offset by $1.25 million in one-time costs related to the Norwood, Massachusetts campus exit and $1.3 million in direct costs from the Bloomfield, New Jersey campus that did not occur in the prior year period. UTI expects the Norwood, Massachusetts campus exit to result in an improvement in annual pre-tax net income, EBITDA and cash flows of between $4 million and $5 million starting in 2021.
• Operating loss was $5.6 million, compared to an operating loss of $8.8 million.
• Net loss was $5.3 million, compared to a net loss of $8.8 million.
• Adjusted operating loss was $4.2 million, compared to an adjusted operating loss of $6.7 million for the prior year period. (See "Use of Non-GAAP Financial Information" below.)
• Loss available for distribution to common shareholders was $6.6 million, or $0.26 per share, compared to a loss of $10.1 million, or $0.40 per share.
• Adjusted EBITDA was $0.8 million, compared to an Adjusted EBITDA loss of $2.3 million.

Kim McWaters, UTI's President and Chief Executive Officer, stated, "The continued success of our Transformation Plan helped drive growth in new student starts and our average student population for the fiscal second quarter. New student start growth was 11.2%, with half of the growth coming from our new Bloomfield, New Jersey campus. Multiple quarters of student start growth drove our average student population higher than the year before.

"For the six-month period ending March 31, 2019, we generated $2.8 million in cash flow from operations and $3.0 million in adjusted free cash flow through new student start growth, improved operating efficiencies and continued rationalization of our campus footprint. Based on our progress year to date, we are reaffirming our 2019 guidance and remain well-positioned for 2020."

GUIDANCE:

Universal Technical Institute sees FY2019 revenue of $322-332 million, versus the consensus of $329 million.

UTI reaffirms the following guidance:

• UTI expects new student starts to grow in the mid to high single digits in fiscal 2019 across the existing campuses and UTI\'s new Bloomfield, New Jersey campus.
• Fiscal 2019 average student population is anticipated to be up low single digits as a result of the transformation plan initiatives and the Bloomfield, New Jersey campus.
• UTI expects full year 2019 revenue to range between $322 million and $332 million, compared to $317 million in fiscal 2018, reflecting the expected increase in the average student population.
• Operating expenses are expected to range between $337 million and $347 million, compared to $352.2 million in fiscal 2018. The decrease in operating expenses are driven across multiple expense categories.
• UTI expects an operating loss of between $10 million and $15 million. UTI expects an adjusted operating loss of between $6 million and $11 million.
• UTI expects to be operating cash flow and adjusted free cash flow positive in fiscal 2019 with an ending cash balance at or above the same level as year-end 2018.
• Net loss is expected to range between $10 million and $15 million. Adjusted EBITDA is expected to be positive and range between $9 million and $15 million.
• Capital expenditures are expected to range between $6 million and $8 million.

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