Universal Technical Institute Inc

Hello, and welcome to the UTI Fiscal First Quarter 2020 Earnings Call. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. At this time, all participants are on listen-only mode, and after today's prepared remarks, we'll open the line for questions. As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Ms. Jody Kent, Vice President of Communications and Public Affairs for Universal Technical Institute. Please go ahead.

Hello and thanks for joining us. With me today are our CEO Jerome Grant and CFO Troy Anderson. During the call today we'll update you on our fiscal first quarter 2020 business highlights, our financial results, and our vision for the future. Then we will open the call for your questions. Before we begin, we must remind everyone that except for historical information, today's call may contain forward-looking statements as defined by Section 21 of the Securities Exchange Act of 1934 and Section 27 of the Securities Act of 1933. I'll refer you to today's news release for UTI's comments on that topic. The safe harbor statement in the release also applies to everything discussed during this conference call. During today's call, we'll refer to adjusted operating income or loss, adjusted EBITDA, and adjusted free cash flow, which are non-GAAP measures. Adjusted operating income or loss is income or loss from operations adjusted for items that affect trends and underlying performance from year to year and are not considered normal recurring cash operating expenses. Adjusted EBITDA is net income or loss before interest expense, interest income, income taxes, depreciation, amortization, and adjusted for items not considered as part of the company's normal recurring operations. Adjusted free cash flow is net cash provided by or used in operating activities less capital expenditures, adjusted for items not considered as part of the company's normal recurring operations. Management uses adjusted operating income and loss, adjusted EBITDA, and adjusted free cash flow as performance measures internally, and those will be the figures discussed on today's call. Starting with the third quarter of fiscal 2019 and through fiscal 2020, we will report operating metrics such as student applications and starts, excluding our Norwood, Massachusetts campus. As we have shared previously, Norwood stopped accepting new student applications in the second quarter of fiscal 2019, and will fully close before the end of fiscal year 2020, so we believe it is appropriate to exclude its impact. It is now my pleasure to turn the call to Jerome Grant.

Jerome Grant Thank you, Jody. Good afternoon, everyone, and thank you for joining us today. I'd particularly like to welcome the notable number of new investors and analysts who have joined us since our last update. We sincerely appreciate your interest and investment in UTI and look forward to working with you in the future. In the first quarter of 2020, UTI delivered excellent results across all of our key metrics, demonstrating the success of our strategy to improve operating performance and pivot the business towards its next phase of growth. In the first quarter, revenue was up 5% compared to last year. New student starts were 1,594, which represents a 7.7% increase over Q1 2019. New enrollments grew 3.3%, and we generated higher revenue per student. That solid top line growth coupled with our success in optimizing costs generated first quarter operating income of $4.3 million, net income of 4.7 and adjusted EBITDA of $10.1 million. Behind those results, our innovative, dedicated team worked aggressively to deliver on our three pronged strategy of building new profitable campuses and offering new programs transforming marketing admissions and our student journey and optimizing our cost structure with a keen focus on rationalizing our real estate footprint. All three of these strategic elements are designed not only to further drive shareholder value creation, but also to enhance the company's value proposition to our students, thereby positioning the company for the long-term success across any phase of the economic cycle. While we made progress on each of these focus areas in the first quarter, I'd like to highlight two recent accomplishments in particular that fall into the areas of offering new and enhanced programs. The growth of our welding program and the expansion of our partnership with Volvo. Based on the initial success of our first three welding technology programs in Dallas, Texas, Rancho Cucamonga, California, and Avondale, Arizona, and recognizing a job market where demand far exceeds the supply, we are accelerating the geographic expansion of this program. We're on schedule to open our previously announced Houston welding program in April, and earlier this week we announced we'll launch our fifth welding program at our Long Beach campus in August. With at least one more location in our sights for 2021, welding will be available at a minimum of six UTI campuses. Once each welding program is fully ramped, they typically yield 150 to 200 incremental starts a year, which is roughly 1.5% of our current start total. Our second major accomplishment in the first quarter was our new agreement with Volvo Car Corporation. As part of our work to build innovative programs in partnership with industry, we will integrate Volvo's advanced and electrified vehicles in order to enhance our core automotive curriculum. The agreement puts state-of-the-art industry technology into the hands of our students and lets Volvo showcase their leading-edge products across 11 of our campuses. It's also an innovative way to promote Volvo Service Automotive Factory Education, or our SAFE program, which is exclusively offered at UTI's campus in Avondale, Arizona, at no cost to students who are accepted into the program. Turning to the second prong of our strategy, transformation, We're building on the progress we've made in the past two years and are continuing to refine and optimize our marketing and admission strategies with the goal of finding the most efficient and effective ways to engage new students. We're now generating more than 50% of our inquiries from our highest converting media channels such as UTI.edu and we're exploring and implementing new technology that will increase the efficiency of our lead generation, lower costs, and further increase our show rates. We're implementing new business analytics systems which are giving us significantly more insight into how prospective students learn about UTI and how they interact with us online. With this greater depth of understanding, we can optimize the performance of our campaigns and drive a greater return on our marketing investment. In addition, were successfully engaging and tracking the behavior of our target audiences using social media. As social media channels evolve and offer more advertising opportunities, we're testing new channels and seeing positive results. In one instance, we began a test in November because there was a new advertising opportunity and saw immediate traction for UTI brand and inquiries at a lower than expected cost per leaf. Now we're looking to expand the use of that social media channel for additional programs offered by UTI, such as Motorcycle, as the fiscal year progresses. Events and programs are a powerful way to attract new students. A recent national open house event had nearly 2,000 attendees, including both prospective students and their influencers, and generated more than 100 enrollments on that day alone. Based on our success with previously national open houses, we expect more enrollments coming directly from this event in the coming weeks and months. Our early employment initiative, which we launched last year in Arizona, is expanding to our Exton campus later this month. From there, we'll move on to Sacramento with plans to roll the program out across all UTI campuses by the end of 2021. This program, which blends proven post-secondary skills education with on-the-job apprenticeship-type training, is aimed at developing talent pipelines for employer partners and giving students the inside track on rewarding long-term careers. Under the Early Employment Initiative, students can apply for jobs while participating local employers just as soon as they enroll. Employers registered with the program can screen, hire, and train students as they start school, give them on-the-job experience while they complete their education. Graduates who have met the employer's criteria are offered full-time jobs and will get their school expenses paid for and reimbursed, along with other incentives. At Exton, there will be more than 30 employment positions available this winter. As we announced in January, We're looking to align our senior leadership team with the goals of streamlining and optimizing interactions with students from lead generation through graduation, continuing to improve our strong student outcomes while becoming more efficient and both innovating and deepening our industry partnerships. Our new chief strategy and transformation officer, Todd Hitchcock, is leveraging his industry experience and leading our growth strategy development as well as our work to identify and leverage new opportunities for UTI. In addition, we're redefining our student outreach strategy with marketing admissions set to reside under a chief commercial officer. A national search is underway and going well. I'd like to spend just a few minutes discussing our industry partnerships, which are a fundamental, longstanding element of UTI's successful education model and brand differentiation. UTI is unique for its ten automotive and five diesel manufacturer specific advanced training programs. We call them MSATs, which we develop and offer in collaboration with our industry partners. In just a few months after completing their core certification, our students can get the brand specific training and industry recognized certifications that can often take core certification graduates more than two or three years to achieve out in the field. These programs help meet employers' strong need for specialized skilled talent and help students build their careers more quickly. On February 4th, we're proud to celebrate our 20th anniversary of our partnership with Ford Motor Company, a partnership that exemplifies our enduring relationship with industry. In fiscal 2020, we're expanding our industry strategy and focus and working to deepen industry relationships in a more proactive, innovative, and productive ways. Our new agreement with Volvo is just one example. Our industry partnerships are also helping us to reach and train more military veteran technicians who are increasingly in demand. We're pleased with the progress of our BMW On Base program in Camp Pendleton in California, which trains students in the last few months before their military service ends to go directly to work for BMW dealers as they transition to civilian life. Now we're working with BMW on a second OnBase training program. Additionally, with Penske Premier Truck Group, we will launch a new OnBase diesel career skills program at Fort Bliss, Texas this spring. This will be the first OnBase diesel career skills program in the history of the U.S. Army. In just a few moments, Troy will share with you an update on the third prong of our strategy, which is optimizing our cost structure with a keen focus on real estate rationalization. In all, we feel good about the business and our prospects for 2020, and we remain intently focused on delivering both our promises for this year and the next phase of growth for UTI. This business has plenty of room to scale, and with the full support of our board, the management team is continuing to evaluate further organic and inorganic opportunities for growth. and examining adjacent markets where we can leverage our core capabilities to serve more students and more industry partners. I'd now like to turn the call over to Troy for a discussion of our financial results. Then I'll come back and close with a few final thoughts. Troy? Thank you, Jerome.