Universal Technical Institute, Inc. — Form 10-Q Summary
Business context and reporting period
Fiscal first quarter ended December 31, 2022; filed February 9, 2023. UTI provides transportation and skilled-trades education, and acquired healthcare educator Concorde Career Colleges on December 1, 2022. Accordingly, reported results include only one month of Concorde operations. The company reported UTI and Concorde as separate segments for the first time.
Financial performance and liquidity
| Metric | Q1 FY2023 | Q1 FY2022 |
|---|---|---|
| Revenue | $120.0 million | $105.1 million |
| Operating income / margin | $4.4 million / 3.7% | $13.6 million / 12.9% |
| Net income | $2.6 million | $14.8 million |
| Net income available to common shareholders | $0.9 million | $8.2 million |
| Diluted EPS | $0.02 | $0.25 |
| EBITDA (non-GAAP) | $10.0 million | $17.4 million |
| Operating cash flow | $2.8 million | $2.5 million |
Revenue increased 14.2%; Concorde contributed $14.4 million, while UTI revenue rose 0.5% to $105.6 million. UTI average active students declined 1.6%, partly offset by higher average revenue per student. Concorde had 7,737 average active students during its first reported month.
Operating expenses rose to $115.6 million from $91.5 million. Educational services and facilities expense was $61.4 million; selling, general and administrative expense was $54.1 million. Higher costs included Concorde, campus and program expansion, growth initiatives, integration and other transaction-related costs. The effective tax rate was 36.5%, versus a 10.0% tax benefit in the prior-year quarter.
Cash and cash equivalents were $162.2 million at December 31, 2022, plus $4.5 million restricted cash. Current assets were $215.0 million and current liabilities $169.2 million. Cash from operations was $2.8 million; investing activities provided $5.2 million, reflecting $29.0 million of investment maturities, partly offset by acquisition-related cash outflow and capital spending; financing provided $88.7 million, primarily from revolver borrowings.
Debt totaled $163.5 million gross ($163.0 million net of debt issuance costs), including $90.0 million drawn on a new $100 million revolving facility to fund the Concorde acquisition. A $1.8 million letter of credit left $8.2 million available at quarter-end. The facility matures in November 2025; UTI reported compliance with its debt covenants. Operating lease liabilities were $219.9 million.
Material changes versus the prior comparable period
- Revenue growth was primarily acquisition-driven; UTI’s standalone revenue was nearly flat.
- Operating income fell $9.1 million and operating margin contracted from 12.9% to 3.7%; net income fell $12.2 million. The comparison also reflects a prior-year tax benefit versus current-period tax expense.
- Interest expense increased to $1.4 million from $0.2 million, reflecting additional borrowing, including the acquisition facility.
- Concorde expanded the business into healthcare education and added 17 campuses across eight states. Its preliminary purchase accounting recorded $10.1 million of goodwill and $4.8 million of intangible assets.
Outlook, risks and unusual items
Management said cash on hand and operating cash flows are expected to meet working-capital, capital expenditure and other liquidity needs over the next 12 months and beyond, including announced growth initiatives. It gave no specific revenue, earnings or enrollment guidance. Management described continuing investment in growth and diversification, alongside efforts to improve productivity and control costs. Results are seasonal and may fluctuate with enrollment patterns and campus or program expansion.
Key risks include maintaining authorization, accreditation and Title IV eligibility; compliance with changing federal and state education rules; enrollment and student outcomes; acquisition integration and realization of expected benefits; and student-credit collection risk. A revised federal 90/10 rule is effective July 1, 2023. The CFPB had requested information about UTI student lending and the company was awaiting further guidance. The company reported no material legal proceedings, while noting that legal matters could adversely affect results.
Unusual and consequential items include the $48.7 million Concorde cash consideration, $90.0 million revolver draw, and $0.8 million of Concorde transaction costs incurred in the quarter. Concorde purchase-price allocation remained preliminary. The company also disclosed variable-rate exposure; swaps fix rates on half of the Avondale and Lisle term-loan principal, but the new revolver is variable-rate debt.
Important facts for investors to verify
- Concorde’s full-quarter and subsequent operating contribution, integration costs, seasonality and final purchase-price allocation.
- Whether revenue growth and margins improve after the acquisition-related and expansion costs; assess UTI enrollment trends separately from acquisition effects.
- Revolver availability, covenant compliance, interest costs and repayment requirements, including the clean-off provision and the 2024 scheduled debt maturities.
- Continued Title IV and state authorization compliance, the effects of the 90/10 rule, and any further CFPB action regarding student lending.
- Student receivable and proprietary-loan performance, including Concorde’s retail installment contracts and UTI’s exposure to credit and collection losses.