Universal Technical Institute Inc

Hello, and welcome to the Universal Technical Institute Fiscal First Quarter 2021 Earnings Conference Call. All participants will be on the Snelly mode. Should you need assistance, please call a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I now want to turn the conference over to Jody Kent. Ms. Kent, please go ahead.

Before we begin, we want to remind everyone that today's call will contain forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Please carefully review today's press release for additional information and important disclosures about forward-looking statements. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict, and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. As a reminder, the section entitled Forward-Looking Statements in today's press 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 financial 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, and 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 internally uses adjusted operating income and loss, adjusted EBITDA, and adjusted free cash flow as performance measures, and those figures will be discussed on today's call. As a reminder, we have provided reconciliations of these non-GAAP measurements to the most directly comparable GAAP financial measurements in today's press release, and we encourage you to carefully review those reconciliations. Starting with the third quarter of fiscal 2019 and through fiscal 2020, we have reported 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 the campus was fully closed in July 2020. So we believe it is important to exclude its impact. It is now my pleasure to turn the call over to our CEO, Jerome Grant.

Thank you, Jody. Good afternoon, everyone, and thank you all for joining us today. To begin, I'd like to once again applaud the tremendous effort of our staff and students during the quarter. We were able to make progress on a number of strategic initiatives while keeping all of our campuses fully operational, starting 1,927 students, a nearly 21% increase over Q1 2020, and graduating 1,510 students, despite a significant spike in COVID-19 cases throughout the country. As with most post-secondary institutions around the world, we did experience some temporary effects related to the pandemic this past quarter. Troy will share more of our metrics and full financial results with you a bit later in the call. You may recall from our last update that in addition to keeping UTI open and moving forward in this challenging environment, our focus is in three key areas that we believe will be driving the evolution of UTI. Student outcomes, innovation, and our long-term growth and diversification strategy. Student outcomes continue to be the foundation or platform on which UTI is built. UTI's past and future is inexorably tied to this measure because we only succeed when our students succeed. Ensuring the highest level of outcomes is a team effort. The foundation of that team are world-class instructors, support staff, and curriculum design specialists. Additionally, One of UTI's most unique and critical outcomes-oriented value propositions is our relationship with our employment, military, and OEM partners. This quarter, we continue to build those partnerships to maximize the success rate of our students. One excellent example is the announcement we made in November of our collaborative new hands-on training program at Fort Bliss in El Paso, Texas. This innovative three-way partnership between UTI Premier Truck Group, a wholly owned subsidiary of Penske Automotive Group, and the U.S. Army is the first on-base diesel commercial vehicle technician career skills program in the history of the U.S. Army. A second example of how partnership drives outcomes is the announcement we made in December featuring the expansion of our exclusive relationship with Dahmer Trucks of North America, or GTNA, the number one heavy-duty truck manufacturer in North America. We're thrilled to be expanding DTNA's Finish First program to Orlando campus in the summer of 2021. The program trains students to maintain, diagnose, and repair DTNA's industry-leading brands, including Prateliner, Western Star, and Detroit. Orlando will become the third UTI campus to be offering this exclusive program, joining our campuses in Avondale, Arizona and Lyle, Illinois. These partnerships underscore that UTI's education model has a long track record of distilling students the key skills that leading employers nationwide require. A great example of how this all comes together for both students and industry is Kevin Smith. Kevin graduated from the Auto, Diesel, and Ford program at our Houston campus in 2004, and he's built a successful 17-year career. He tells us that UTI helped create the foundation that his success has been built upon. giving him work ready skills needed to succeed as a level one technician and then grow over time to become general manager at Rush Truck Center in Haines City, Florida, which is just outside of Orlando. Kevin now regularly interviews prospective technicians from UTI's Orlando campus for positions at his location. He does so because he says they receive the state of the industry training needed to immediately hit the ground running and because throughout their UTI education, they've been held to a high level of professionalism, which translates to more successful and reliable employees. In the past few years, Kevin's hired many technicians from UTI in Orlando, and their demand for technicians continues to be strong. Kevin also told us that UTI's shift to a blended learning model is a benefit to both students and employers because it aligns more seamlessly to the continuous learning technicians already do on the job. He said, it's another step that UCI takes to better prepare students for the real world. Kevin's story embodies the lifelong value of our strategic partnership and also sheds light on a key area where we're innovating to better prepare our students for today's job market. That area is our blended learning approach. To continue to build on both our history and promise for successful outcomes for our students, we must challenge ourselves to innovate. to better align our platforms, our model, and our overall offerings with our market. I think it's important to take a step back here and remind everyone that our blended learning model was not merely developed in response to COVID-19. More limited iterations of this model were developed years ago and had already rolled out in stages across a number of our campuses. The onset of the global pandemic last year necessitated a rapid expansion to a full blended learning model across our system in the first half of 2020. We're seeing the advantages of blended learning come to fruition as time progresses and are confident its value will live on to serve as yet another durable advantage for UTI. Thus, we will continue to invest appropriately in content, technology, and people to fuel its growth. It's also important to note that blended learning is much different than the purely online learning approach used around much of the U.S. right now. The skills our students need require substantial hands-on instruction and our blended learning approach allows our students to complete the classroom portion of the curriculum online while still receiving all of their hands-on labs in person. None of that's virtual, so no crucial hands-on training is omitted. Not only does the approach offer students more flexibility and convenience, it also enables us to reduce, repurpose, and and consolidate previously used classroom space to enhance our overall efficiency. For example, we recently announced the purchase of our Avondale, Arizona campus and the relocation of our motorcycle programs to Avondale from their current location in North Phoenix. This move comes with substantial financial benefits to UTI and its shareholders and was facilitated through the efficiencies realized through our blended learning approach. Kevin from Russ Trucking is not alone in recognition and praise of our new innovative learning model. Numerous employer partners have also expressed immense gratitude for the computer skills we're now providing to our graduates. The reality is that while the majority of jobs for which we train are centered around hands-on skills, digital literacy is also essential in these fields. We're confident that our blended learning model will continue to evolve to better serve the needs of our students and employment partners alike. while unlocking further efficiency opportunities that just were not feasible under our traditional operating model. A second area of innovation I'd like to highlight is with our marketing approach, where throughout the last several months, we've strategically directed time and capital to further drive the efficiency and effectiveness of our campaigns. While we continue to support our national brand appeal, we've begun to allocate more resources to potential students living near our campuses. In the current environment of high unemployment, restricted travel, and health and safety modifications, this emphasis makes sense and is supportive of our students and their families. As a management team, we felt that it was our responsibility to ensure that the local communities in which we operate across this country fully understood and maximized the benefits of what we had to offer. This could not be fully realized with a predominantly national approach to advertising. You see, it's really a win-win opportunity. Less costly for students and their families in terms of relocation and living expenses, increased flexibilities to complete their education utilizing our blended learning model while working at the same time, more cost effective for us, and enabling our students to spend more time with their families. As stakeholders in our communities, these are critical opportunities and students that we must do our best to connect with and serve. As we mentioned last quarter, we've altered our messaging to both acknowledge the sharp increase in unemployment of the 16- to 24-year-old population in the U.S., and more concretely, highlight the incredible robust job opportunities in prospective student local markets. Many of our advertisements now include information on the number of open jobs, program length, and starting salaries within the campus communities, which are all backed by concrete and publicly available data. We want people to know from the start what they can achieve by enrolling in our programs and exactly how long it takes to reach their goals. We're seeing the impact of our more locally focused advertising and sharpened messaging through an impressive increase in lead flow, heightened conversion rates, and improved start rates, all which are effectively improving the return on our marketing investment. Finally, before I turn the call over to Troy, I'd like to provide a brief update on our growth and diversification efforts and how we're moving forward to shape the future of UTI. Program expansion serves as one of the tenants of our plan, and it should be underscored that although we're looking at organic and inorganic means to bring more programs to UTI, substantial opportunity remains to grow through the channels in which we currently operate. To that end, we plan to continue to expand our current offerings such as welding technology across the footprint. Just last week we announced the February launch of our sixth welding technology program in Lyle, Illinois, along with the planned launch in Bloomfield, New Jersey later this year. We also announced our intention to bring two more welding programs to our campuses in 2022, which will bring the total to nine campuses and represent nearly complete rollout of this highly successful program. You see, we want to be able to offer the best solution possible for the many people who want to post-secondary education but feel that a typical college degree just isn't right for them. Our teams also continue to make substantial progress on a number of other strategic initiatives supporting our growth and diversification plan as well. We have worked diligently in collaboration with the UTI Board of Directors to solidify the plan of how our capital will be deployed and when. Although we have no announcements on this front today, we expect that we'll be able to share more soon. With that said, I'd now like to turn the call over to Troy for a discussion of our key accomplishments, operating and financial metrics, as well as guidance for the balance of the year. After which, I'll return to provide some closing thoughts and open the call up for questions. Troy?