Universal Technical Institute, Inc. — Q2 FY2024 Form 10-Q
Reporting period: Quarter and six months ended March 31, 2024. Amounts below are in millions of dollars unless otherwise noted. UTI provides transportation and skilled-trades education; Concorde provides healthcare education.
Financial performance
| Metric | Three months ended Mar. 31, 2024 | Prior-year quarter | Six months ended Mar. 31, 2024 | Prior-year six months |
|---|---|---|---|---|
| Revenue | $184.2 | $163.8 | $358.9 | $283.8 |
| Operating income | $11.2 | $5.9 | $25.4 | $10.4 |
| Operating margin | 6.1% | 3.6% | 7.1% | 3.6% |
| Net income | $7.8 | $3.5 | $18.2 | $6.1 |
| Diluted EPS | $0.14 | $0.04 | $0.31 | $0.07 |
| EBITDA (non-GAAP) | $18.5 | $12.8 | $39.9 | $22.8 |
Quarterly revenue rose 12.4%; six-month revenue rose 26.4%. Quarter revenue increased at UTI by 14.7% and Concorde by 8.2%. For the six-month comparison, UTI revenue increased 12.0% and Concorde 70.0%; the latter comparison includes two additional months of Concorde results in the current period.
For the quarter, educational services and facilities costs were 52.9% of revenue versus 53.1% a year earlier, while selling, general and administrative costs were 41.0% versus 43.3%. Higher student volumes supported revenue and operating-income growth. Six-month operating cash flow was $8.3 million, compared with cash used of $4.3 million in the prior-year period; cash generation was reduced by working-capital outflows, including an $18.1 million decline in deferred revenue.
Balance sheet, cash flow and financing
- At March 31, cash and cash equivalents were $116.1 million, restricted cash $4.4 million, and total current assets $170.2 million. Cash and cash equivalents were down $35.4 million from September 30, 2023.
- Gross debt, including finance leases, was $142.3 million; debt net of issuance costs was $141.9 million. The $100 million revolving facility had $71.0 million drawn and $29.0 million available at quarter end. In April, the company paid $20.0 million on the facility, increasing availability to $49.0 million.
- Six-month investing cash use was $9.8 million, primarily capital expenditures. Financing cash use was $35.0 million, including net revolving-credit repayments of $19.0 million and $11.5 million for the preferred-share repurchase.
- The company reported compliance with debt covenants at March 31. The revolving facility matures in November 2025; management says it may borrow again for working-capital or other needs.
Material developments and outlook
- Consolidated new student starts increased 18.5% in the quarter and 42.0% for the six-month period; average full-time active students rose 9.8% and 8.0%, respectively. Management attributed growth to demand and new program launches. The six-month Concorde starts comparison covers different ownership periods.
- In December 2023, the company repurchased 33,300 Series A preferred shares for $11.3 million and converted the remaining preferred shares into approximately 19.3 million common shares. No preferred shares remain outstanding; the conversion increased common shares and ended future preferred dividends.
- The planned Houston campus consolidation has estimated total costs of approximately $1.4 million. The MIAT Houston campus is expected to begin a phased teach-out in May 2024; both facilities will remain in use. Additional costs are expected in the remainder of FY2024 and FY2025.
- Management expects operating cash flows, cash on hand and the revolving facility to meet working-capital, capital-expenditure and other liquidity needs over the next 12 months and beyond. No quantified revenue or earnings guidance is provided in the filing.
- Key risks include extensive education-sector regulation and continued eligibility for Title IV and other student aid, enrollment and employment outcomes, execution of growth and acquisition strategies, and debt covenant/payment obligations. The company reported no material legal proceedings, while noting that claims or proceedings could adversely affect results.
Most important facts for investors to verify
- Whether enrollment growth and new program launches translate into sustained revenue and operating-margin improvement, particularly at Concorde.
- The cash-flow and working-capital outlook, including deferred-revenue movements, student loan utilization, capital spending and use of the revolving facility.
- Debt maturity, interest-rate exposure, covenant compliance and the effect of any future borrowing.
- The costs, timing and operational effects of the Houston consolidation and other growth initiatives, alongside ongoing Title IV and regulatory compliance.