Date of Report (Date of Earliest Event Reported): | February 8, 2018 |
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 |
Exhibit No. | Description | |
Press Release of Universal Technical Institute, Inc., dated February 8, 2018 |
Universal Technical Institute, Inc. | ||||
February 8, 2018 | By: | /s/ Bryce H. Peterson | ||
Name: Bryce H. Peterson | ||||
Title: Chief Financial Officer |
• | Revenues for the quarter were $81.2 million, compared to $84.2 million for the prior year period. The year-over-year revenue variance was attributable to a 5.8% decrease in UTI’s average student population. |
• | Operating expenses for the quarter were $84.8 million, compared to $82.8 million for the prior year period. |
• | Operating loss for the quarter was $3.6 million compared to operating income of $1.4 million for the prior year period. The decline reflects the $3.0 million decrease in revenues as well as increases in advertising, contract services and professional services expenses, partially offset by a decrease in compensation expense. |
• | Income tax benefit was $2.8 million for the quarter, compared to an income tax expense of $2.6 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 for the quarter was $1.1 million, compared to $1.7 million for the prior year period. |
• | Net loss available for distribution to common shareholders was $2.5 million, or $0.10 per diluted share, compared to $3.0 million, or $0.12 per diluted share for the prior year period. |
• | Earnings before interest, taxes, depreciation and amortization (EBITDA) for the three months ended December 31, 2017 was $0.8 million, compared to $6.3 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, 2018. |
Three Months Ended December 31, | |||||
2017 | 2016 | ||||
(Rounded to hundreds) | |||||
Total starts | 1,300 | 1,400 | |||
Average undergraduate full-time student enrollment | 11,300 | 12,000 | |||
End of period undergraduate full-time student enrollment | 10,400 | 10,800 |
• | UTI expects new student starts to grow in the low single digits in fiscal 2018 with the growth more heavily weighted toward the back half of the year. UTI’s goal is for its student population at year-end 2018 to be larger than it was at year-end 2017. |
• | Fiscal 2018 average student population is anticipated to be down in the mid single digits due to a 6% lower beginning population and the timing of the low single digit start growth expected for the full year. |
• | UTI expects full year 2018 revenue to range between $310 million and $320 million, compared to $324 million in fiscal 2017, primarily due to the expected lower average student population. |
• | Operating expenses are expected to range between $340 million and $345 million. |
• | UTI expects an operating loss of between $20 million and $25 million and negative EBITDA due to the lower total revenue expected in 2018 as compared to 2017, along with the financial impact of opening its New Jersey campus, its planned investments in marketing and admissions to support start growth and the planned expansion of its welding program. |
• | Capital expenditures are expected to be between $24 million and $25 million, including $11 million for the Bloomfield, New Jersey campus that is expected to open in fall 2018; approximately $4 million to expand the Company's welding program to two additional campuses; $7 million for new and replacement equipment for existing campuses; and approximately $2.5 million for real estate consolidation. The Company expects its efforts to rationalize its real estate footprint will provide net cost savings of $3 million to $4 million on an annualized basis starting in fiscal 2019. |
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
(In thousands, except per share amounts) | ||||||||
Revenues | $ | 81,156 | $ | 84,179 | ||||
Operating expenses: | ||||||||
Educational services and facilities | 44,081 | 47,154 | ||||||
Selling, general and administrative | 40,679 | 35,638 | ||||||
Total operating expenses | 84,760 | 82,792 | ||||||
Income (loss) from operations | (3,604 | ) | 1,387 | |||||
Other income (expense): | ||||||||
Interest expense, net | (431 | ) | (749 | ) | ||||
Equity in earnings of unconsolidated affiliate | 97 | 128 | ||||||
Other income (expense), net | (26 | ) | 120 | |||||
Total other expense, net | (360 | ) | (501 | ) | ||||
Income (loss) before income taxes | (3,964 | ) | 886 | |||||
Income tax expense (benefit) | (2,829 | ) | 2,610 | |||||
Net loss | $ | (1,135 | ) | $ | (1,724 | ) | ||
Preferred stock dividends | 1,323 | 1,323 | ||||||
Loss available for distribution | $ | (2,458 | ) | $ | (3,047 | ) | ||
Loss per share: | ||||||||
Net loss per share - basic | $ | (0.10 | ) | $ | (0.12 | ) | ||
Net loss per share - diluted | $ | (0.10 | ) | $ | (0.12 | ) | ||
Weighted average number of shares outstanding: | ||||||||
Basic | 25,008 | 24,625 | ||||||
Diluted | 25,008 | 24,625 |
Dec. 31, 2017 | Sept. 30, 2017 | |||||||
Assets | (In thousands) | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 86,450 | $ | 50,138 | ||||
Restricted cash | 14,143 | 14,822 | ||||||
Trading securities | — | 40,020 | ||||||
Held-to-maturity investments, current portion | 6,804 | 7,759 | ||||||
Receivables, net | 8,969 | 15,197 | ||||||
Notes receivable, current portion | 5,074 | — | ||||||
Prepaid expenses and other current assets | 19,847 | 18,890 | ||||||
Total current assets | 141,287 | 146,826 | ||||||
Property and equipment, net | 105,794 | 106,664 | ||||||
Goodwill | 9,005 | 9,005 | ||||||
Notes receivable, less current portion | 35,178 | — | ||||||
Other assets | 11,634 | 11,607 | ||||||
Total assets | $ | 302,898 | $ | 274,102 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 32,928 | $ | 37,481 | ||||
Deferred revenue | 41,880 | 41,338 | ||||||
Accrued tool sets | 2,797 | 2,764 | ||||||
Dividends payable | 1,323 | — | ||||||
Financing obligation, current | 1,158 | 1,106 | ||||||
Income tax payable | 334 | 490 | ||||||
Other current liabilities | 3,285 | 3,210 | ||||||
Total current liabilities | 83,705 | 86,389 | ||||||
Deferred tax liabilities, net | 329 | 3,141 | ||||||
Deferred rent liability | 6,334 | 6,887 | ||||||
Financing obligation | 41,724 | 42,035 | ||||||
Other liabilities | 9,923 | 9,874 | ||||||
Total liabilities | 142,015 | 148,326 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ equity: | ||||||||
Common stock, $0.0001 par value, 100,000,000 shares authorized, 31,874,623 shares issued and 25,009,726 shares outstanding as of December 31, 2017 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 December 31, 2017 and September 30, 2017, liquidation preference of $100 per share | — | — | ||||||
Paid-in capital - common | 185,496 | 185,140 | ||||||
Paid-in capital - preferred | 68,853 | 68,853 | ||||||
Treasury stock, at cost, 6,864,897 shares as of December 31, 2017 and September 30, 2017 | (97,388 | ) | (97,388 | ) | ||||
Retained earnings (deficit) | 3,919 | (30,832 | ) | |||||
Total shareholders’ equity | 160,883 | 125,776 | ||||||
Total liabilities and shareholders’ equity | $ | 302,898 | $ | 274,102 |
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
(In thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,135 | ) | $ | (1,724 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 3,362 | 3,639 | ||||||
Amortization of assets subject to financing obligation | 671 | 670 | ||||||
Bad debt expense | 338 | 249 | ||||||
Stock-based compensation | 359 | 548 | ||||||
Deferred income taxes | (2,812 | ) | — | |||||
Equity in earnings of unconsolidated affiliates | (97 | ) | (128 | ) | ||||
Training equipment credits earned, net | (224 | ) | (246 | ) | ||||
Other gains (losses), net | 11 | (13 | ) | |||||
Changes in assets and liabilities: | ||||||||
Restricted cash | (21 | ) | (11,147 | ) | ||||
Receivables | 5,890 | 2,574 | ||||||
Prepaid expenses and other assets | (1,250 | ) | (362 | ) | ||||
Notes receivable | (3,043 | ) | — | |||||
Accounts payable and accrued expenses | (4,952 | ) | (12,644 | ) | ||||
Deferred revenue | 542 | (2,283 | ) | |||||
Income tax payable/receivable | (156 | ) | 4,198 | |||||
Accrued tool sets and other current liabilities | 360 | 78 | ||||||
Deferred rent liability | (553 | ) | (509 | ) | ||||
Other liabilities | 82 | (304 | ) | |||||
Net cash used in operating activities | (2,628 | ) | (17,404 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (2,556 | ) | (1,441 | ) | ||||
Proceeds from disposal of property and equipment | 2 | — | ||||||
Proceeds received upon maturity of investments | 947 | 720 | ||||||
Purchase of trading securities | (894 | ) | — | |||||
Proceeds from sales of trading securities | 40,902 | — | ||||||
Return of capital contribution from unconsolidated affiliate | 101 | 118 | ||||||
Restricted cash: other | 700 | 2,037 | ||||||
Net cash provided by investing activities | 39,202 | 1,434 | ||||||
Cash flows from financing activities: | ||||||||
Payment of financing obligation | (259 | ) | (214 | ) | ||||
Payment of payroll taxes on stock-based compensation through shares withheld | (3 | ) | (2 | ) | ||||
Net cash used in financing activities | (262 | ) | (216 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 36,312 | (16,186 | ) | |||||
Cash and cash equivalents, beginning of period | 50,138 | 119,045 | ||||||
Cash and cash equivalents, end of period | $ | 86,450 | $ | 102,859 |
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
(In thousands) | ||||||||
Net loss | $ | (1,135 | ) | $ | (1,724 | ) | ||
Interest expense, net | 431 | 749 | ||||||
Income tax expense (benefit) | (2,829 | ) | 2,610 | |||||
Depreciation and amortization | 4,376 | 4,639 | ||||||
EBITDA | $ | 843 | $ | 6,274 |
Three Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
(In thousands) | ||||||||
Salaries expense | $ | 34,036 | $ | 35,796 | ||||
Employee benefits and tax | 7,379 | 7,504 | ||||||
Bonus expense | 1,762 | 1,787 | ||||||
Stock-based compensation | 359 | 548 | ||||||
Total compensation and related costs | $ | 43,536 | $ | 45,635 | ||||
Occupancy expense, net of subleases | $ | 9,221 | $ | 9,463 | ||||
Depreciation and amortization expense | $ | 4,376 | $ | 4,639 | ||||
Bad debt expense | $ | 338 | $ | 249 |