Universal Technical Institute, Inc. — Q1 FY2024 Form 10-Q
Reporting period: Three months ended December 31, 2023. Unless stated otherwise, financial amounts are in millions of dollars. The company provides transportation, skilled-trades and healthcare career education through UTI and Concorde.
Financial performance and liquidity
| Metric | Q1 FY2024 | Prior-year quarter |
|---|---|---|
| Revenue | $174.7 | $120.0 |
| Operating income / margin | $14.2 / 8.1% | $4.4 / 3.7% |
| Net income / net margin | $10.4 / 5.9% | $2.6 / 2.2% |
| Net income available to common shareholders | $6.4 | $0.9 |
| Diluted EPS | $0.17 | $0.02 |
| Operating cash flow | $10.8 | $2.8 |
- Revenue increased 45.6%. UTI revenue rose 9.3% to $115.4 million; Concorde revenue was $59.3 million.
- Management-reported EBITDA, a non-GAAP measure, was $21.4 million versus $10.0 million.
- Cash and cash equivalents were $143.6 million at December 31, down from $151.5 million at September 30. Restricted cash was an additional $5.2 million. Current assets were $197.4 million and current liabilities were $181.9 million.
- Gross debt was $162.0 million ($161.5 million net of debt issuance costs), including $90.0 million drawn on the revolving facility. Revolver availability was $8.2 million at quarter-end. In January 2024, the company repaid $39.0 million from cash, increasing availability to $47.2 million as of January 10. The company reported compliance with debt covenants at December 31.
- Operating cash flow improved year over year. Investing activities used $3.8 million, primarily for property and equipment; financing activities used $15.1 million, including the preferred-stock repurchase and dividend. Cash, cash equivalents and restricted cash totaled $148.8 million at quarter-end.
Changes versus the prior comparable period
- Concorde was acquired on December 1, 2022, so the prior-year quarter included only one month of Concorde operations, versus a full quarter in Q1 FY2024. This is a major factor in consolidated revenue and expense growth.
- UTI reported 2,314 new starts, up 17.2%, and average active students of 14,321, up 6.0%. Concorde average active students rose 6.6% to 8,244. Consolidated average active students increased 6.2% to 22,565. Prior-year Concorde start figures reflect only the period after acquisition and are not directly comparable.
- Operating expenses increased to $160.5 million from $115.6 million. Educational services and facilities expense rose to $92.4 million, including higher student housing costs, while SG&A rose to $68.1 million. SG&A declined as a share of revenue to 39.0% from 45.1%, contributing to margin improvement.
- Income tax expense was $3.2 million, at a 23.3% effective rate, versus $1.5 million and 36.5%. Interest expense increased to $2.9 million from $1.4 million.
- On December 18, 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 Series A preferred shares remain outstanding; the conversion increased common shares outstanding.
Outlook, commentary and risks
- No specific financial guidance was provided. Management said cash on hand, operating cash flows and available liquidity are expected to meet working-capital needs, capital expenditures, commitments and announced program expansions over the next 12 months and beyond. It also cited potential strategic uses of cash, including acquisitions, organic growth, real estate, student funding alternatives and common-stock repurchases.
- Management attributed UTI enrollment growth partly to 13 programs launched across eight campuses in fiscal 2023 and stronger demand at many other campuses. It cited ongoing productivity improvements and cost-efficiency efforts.
- The company plans program additions and expansions, some subject to regulatory approval. It is consolidating its two Houston campuses under the UTI brand, with a phased MIAT teach-out beginning in May 2024; both facilities are expected to remain in use. Estimated restructuring costs are approximately $1.4 million, with about $0.6 million expected in the remainder of fiscal 2024 and $0.8 million in fiscal 2025 as incurred.
- Key risks include Title IV and other regulatory eligibility and compliance, potential changes to student-aid programs, enrollment and student financing trends, competition, graduate employment outcomes, acquisition integration, and execution of campus and program expansion. Student starts and operating results are seasonal. A majority of revenue depends on federal student aid and veterans’ benefits.
- The company reported no material legal proceedings currently, but noted that claims or proceedings could adversely affect results and that it could not estimate the ultimate outcome of pending matters generally. Management believed the company and its institutions were in material compliance with applicable regulations at December 31.
Important facts for investors to verify
- Whether enrollment growth, new program launches and student outcomes sustain revenue growth, particularly at UTI and Concorde.
- Post-quarter debt repayment, revolver availability, interest costs, upcoming maturities and continued covenant compliance.
- Exposure to Title IV and other regulatory developments, including any changes in eligibility or funding.
- Execution and full costs of the Houston consolidation and announced program expansions.
- Effects of the preferred-stock conversion on dilution, ownership concentration and future earnings per share.