Universal Technical Institute Inc

Good afternoon and welcome to the Universal Technical Institute First Quarter Fiscal 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal 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 the star then one. Please note that this event is being recorded. I would now like to turn the conference over to Matt Kempton, Vice President of Corporate Finance. Please go ahead, sir.

Hello, and thank you for joining us. With me today are CEO Jerome Grant and CFO Troy Anderson. During the call today, we'll update you on our fiscal first quarter and fiscal year 2022 business highlights, financial results, and vision for the future. Then we will open the call for your questions. 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 Security 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 net income or loss, adjusted EBITDA, and adjusted free cash flow, which are non-GAAP financial measures. Adjusted net income or loss is net income or loss adjusted for items that affect trends and underlying performance from year to year and are not considered normal recurring operations. including the income tax effect on the adjustments utilizing the effective tax rate. 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 internally uses adjusted net income or 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. It is now my pleasure to turn the call over to our CEO, Jerome Grant.

Good afternoon everyone, and thank you all for joining us today. I'd like to begin today's call by thanking our students and staff for their continued commitment and hard work. We had a strong performance as we continue to navigate COVID challenges. I'm proud of our team's dedication, resilience, and effectiveness to ensure our campuses operated seamlessly throughout the entire quarter. We're also thrilled to have the students, faculty, and staff from MIT on the team as the acquisition officially closed November 1st of 2021. The integration is going quite well, and we're excited for the future with them on our team. Today, I'd like to focus my comments in four key areas, performance, outcomes, strategy, and regulation. We delivered another strong top and bottom line performance this quarter, driven by higher average student population as well as higher overall revenue per student on a year-over-year basis. Revenue grew 38% for the quarter compared with a year ago, and adjusted EBITDA grew 360% versus the comparable period a year ago. The first quarter results that were reported today reflect overall solid operating performance and execution against our key priorities. They also include two months of MIAT results. The positive performance in the first quarter sets us up well to deliver on our expectations for the full year. We expected to start the year with strong year-over-year financial performance, and we did just that. Average students, as well as revenue per student, were better than expected, and thus, so was our revenues. And as always, our team was diligent on controlling costs, which, along with revenue favorability, resulted in a strong performance with respect to profitability as well. Starts for the period were up just over 2%, aided by the addition of MIAT to UTI, as well as our new programs. The modest student start rate was not unexpected, as we faced a difficult comparison from last year's first quarter, where we saw 21% year-over-year growth. partially driven by the measurable number of students deferring out of the fourth quarter of 2020 due to COVID travel restrictions and challenges. Hence, our initial commentary on pacing for fiscal 22 indicated that we expected the first half of the year would be our lowest growth for new student starts. Nonetheless, we still believe we are outperforming the broader industry and our peer group, and we're focused on delivering our overall growth objectives for the full year. I want to remind everyone, as we set expectations for 2022, we highlighted that the main risk that was outside of our control would likely be COVID-related. For example, new variants or a spike. And our view on this has not changed as we've seen some impact from Omicron, which burst into the scene in November 2021 as our quarter was winding down. We're seeing modest impact on start rates. The timeline for getting back to pre-pandemic revenue per student numbers And similarly, we're seeing some incremental increases in leave of absences and the number of students studying online only versus our expectations. However, given the trend, we remain optimistic that any impact from this current variant will be brief and we're confident in our ability to manage through it. Despite the choppiness this may cause in the short term, we're laser focused on supporting our students and staff and meeting the full year expectations we've set for the investment community. We've also seen some of the supply chain impacts, which have directly impacted the timeline of obtaining key electrical components for our new Austin campus, and has delayed our targeted launch date for the campus by approximately 90 days, with our new target launch date in late April. I think it's important to note that the enrollments for programs at the Austin campus have been encouraging, in line with our expectations. It's also important to note that our new campus in Miramar, Florida remains on track and on budget for its start in fiscal fourth quarter. Further, our new welding programs are on track, with a program at our NASCAR Tech campus in North Carolina having launched in January with a full first class. And our second new program, which will be at our Exton, Pennsylvania campus, is on schedule for a July launch. Closing on performance, We remain confident and supportive of our full-year guidance, which we reiterate today. As a brief recap, we expect full-year revenue for fiscal 2022 to be in the range of $405 to $420 million for year-over-year growth in the low to mid-20% range. Start growth should be between 14% and 19% and adjusted EBITDA with a range of $50 to $55 million Troy will share more detailed review of the quarter performance in his remarks. Looking at outcomes, we continue to excel here, graduating approximately 2,300 students in the quarter and placing graduating students with employment partners across this country where they can put their advanced technical training to work. Demand continues to be strong as the need for skilled workers remains well in excess of the number of students we graduate each year. Notably, our blended learning model, which has been enthusiastically embraced by our two core constituencies, students and corporate partners, is providing added flexibility in the current environment, creating scheduling options for our students while at the same time enabling them to progress through their programs despite the Omicron interruptions affecting the broader economy. Turning to strategy, we're progressing well on all aspects of our growth and diversification efforts. As a reminder, Over the past 18 months, we've put in place, acted on, or accelerated action on all key components of the strategy. These include investments in new campuses, program expansions such as welding, and strategic acquisitions like MIAT. Importantly, these high-level components of our strategy feed one another, providing cross-fertilization opportunities, like the planned MIAT program expansion across our UTI footprint beginning in 2023. Supporting these efforts are important initiatives, such as the development and rollout of our blended learning model, real estate rationalizations and other footprint optimizations, and operational excellence programs. While we are executing on many activities and initiatives in support of the operational and strategic priorities we've established, we retain the financial capacity and leadership bandwidth to continue to actively evaluate additional growth opportunities that would be additive to the long-term outlook we've established. As we've previously shared, with the strength of our base business and the initiatives we have already underway, we believe we can generate revenue comfortably above $500 million and adjusted EBITDA margins in excess of 20% by fiscal 2025. I also wanted to briefly touch on the broader higher education sector we make our home in, and more specifically, the regulatory environment that governs our industry. Here, as always, our relentless focus on the importance of outcomes is central to what we do. As I've said in the past, we don't manage or plan our business based on which party is in office. We actually keep it quite simple when it comes to how we manage our business in this regard, guided by a simple but important statement regarding what we do every day. We succeed when our students succeed. Lastly, we have a lot of important work to be done in fiscal 2022. as we continue to integrate the MIAT team with UTI. We will be leveraging the UTI national marketing and admissions team to drive growth into the MIAT campuses, and we will be completing the planning and approvals necessary to begin offering MIAT programs at an initial group of UTI campuses in 2023. This is in addition to launching two new UTI campuses and two new welding programs during 22, which we are on track to complete. In summary, I'm pleased with the strong results we've delivered this quarter and even more excited about what's still to come. I'll now hand the call over to Troy for an in-depth discussion of our operating performance and fiscal 2022 outlook. Troy?