Universal Technical Institute(UTI) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Q1 FY2022 unaudited financials show significant growth in assets, revenue, and net income, primarily due to the MIAT acquisition Condensed Consolidated Balance Sheets | Balance Sheet Item | Dec 31, 2021 (in thousands) | Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $147,284 | $183,392 | | Cash and cash equivalents | $99,513 | $133,721 | | Goodwill | $18,026 | $8,222 | | Intangible Assets | $16,302 | $124 | | Total Assets | $533,538 | $512,570 | | Total Current Liabilities | $123,197 | $132,718 | | Total Liabilities | $330,931 | $324,040 | | Total Shareholders' Equity | $202,607 | $188,530 | - Goodwill and Intangible Assets increased significantly from September 30, 2021, to December 31, 2021, primarily due to the acquisition of MIAT College of Technology[16] Condensed Consolidated Statements of Operations | Income Statement Item | Three Months Ended Dec 31, 2021 (in thousands) | Three Months Ended Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | Revenues | $105,075 | $76,125 | | Income from operations | $13,578 | $775 | | Net income | $14,822 | $1,083 | | Net income (loss) available for distribution | $13,499 | $(230) | | Net income (loss) per share - basic | $0.25 | $(0.01) | | Net income (loss) per share - diluted | $0.25 | $(0.01) | - Revenues for the three months ended December 31, 2021, increased by 38.0% year-over-year, leading to a substantial improvement in operating income and net income[18] Condensed Consolidated Statements of Cash Flows | Cash Flow Item | Three Months Ended Dec 31, 2021 (in thousands) | Three Months Ended Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,456 | $7,783 | | Net cash used in investing activities | $(36,859) | $(37,249) | | Net cash used in financing activities | $(517) | $(210) | | Change in cash, cash equivalents and restricted cash | $(34,920) | $(29,676) | | Cash, cash equivalents and restricted cash, end of period | $111,057 | $59,243 | - Investing activities in Q1 FY2022 were dominated by $26.1 million in cash paid for the acquisition of MIAT, net of cash acquired[25] Notes to Condensed Consolidated Financial Statements - On November 1, 2021, the company acquired MIAT College of Technology for a total cash consideration of $28.4 million, as part of its growth and diversification strategy[44][46] - The MIAT acquisition resulted in the recognition of $9.8 million in goodwill and $16.2 million in intangible assets, primarily related to accreditations, trademarks, and curriculum[49][65] - The company recorded an income tax benefit of $1.3 million for the quarter, primarily due to the valuation allowance impact from the MIAT acquisition's deferred tax liability on indefinite-lived intangibles[92] - During the quarter, the company awarded approximately $2.9 million in HEERF II and HEERF III grants to over 2,900 students, with about $4.0 million remaining available for future grants as of December 31, 2021[124] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q1 FY2022 performance to student demand and MIAT acquisition, driving 38.0% revenue growth and improved operating income Overview and Business Strategy | Student Metrics | Dec 31, 2021 | Dec 31, 2020 | % Change | | :--- | :--- | :--- | :--- | | Total new student starts | 1,972 | 1,927 | 2.3% | | Average undergraduate full-time active students | 13,729 | 11,813 | 16.2% | | End of period undergraduate full-time active students | 13,129 | 10,763 | 22.0% | - The company's growth and diversification strategy includes acquisitions, new campus openings, and program expansions, with key actions in the quarter including the MIAT acquisition and launching electric vehicle (EV) technician training coursework[138][139] Results of Operations - Revenues increased by $29.0 million (38.0%) to $105.1 million, driven by a 16.2% increase in average active students, higher revenue per student, and the MIAT acquisition[144] - Educational services and facilities expenses rose by $8.6 million, primarily due to a $3.6 million increase in compensation costs (including $1.4 million from MIAT) and higher costs for supplies, maintenance, and occupancy for new campuses[146][147] - Selling, general and administrative (SG&A) expenses increased by $7.6 million, driven by higher compensation costs ($2.4 million), increased advertising spend ($2.3 million), and professional services fees related to growth initiatives and the MIAT acquisition[152][153] | EBITDA Reconciliation | Three Months Ended Dec 31, 2021 (in thousands) | Three Months Ended Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | Net income | $14,822 | $1,083 | | Interest income | $(12) | $(54) | | Interest expense | $233 | $2 | | Income tax (benefit) expense | $(1,347) | $26 | | Depreciation and amortization | $3,679 | $3,282 | | EBITDA | $17,375 | $4,339 | Liquidity and Capital Resources - As of December 31, 2021, the company had $99.5 million in cash and cash equivalents, a decrease of $34.2 million from September 30, 2021, primarily due to the $28.4 million cash payment for the MIAT acquisition[164] - Net cash provided by operating activities was $2.5 million, a decrease from $7.8 million in the prior-year period, mainly due to the timing of payments for vendor, payroll, and bonus accruals, and changes in deferred revenue[169][171] - Cash used in investing activities was $36.9 million, consisting of $26.1 million (net) for the MIAT acquisition and $10.8 million for property and equipment, including investments in new campuses in Austin, TX and Miramar, FL[173] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is to interest rate changes, affecting interest income from cash and interest expense on variable-rate debt, partially mitigated by an interest rate swap - The company holds $99.5 million in cash and cash equivalents, primarily in money market funds, with low exposure to interest rate fluctuations[183] - The company has a $31.2 million term loan with a variable interest rate of LIBOR plus 2.0%, mitigated by an interest rate swap fixing the rate at 3.5% on 50% of the principal[184] - A hypothetical 1.0% change in the one-month LIBOR would result in a $0.1 million change to the company's annual interest expense on the unhedged portion of its long-term debt[185] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2021, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of the end of the period, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[186] - There were no changes in internal control over financial reporting during the three months ended December 31, 2021, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[187] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is subject to various legal proceedings in the ordinary course of business, with potential losses accrued if probable and estimable, though ultimate outcomes remain uncertain - The company is periodically subject to lawsuits, investigations, and other claims in the ordinary course of business, accruing for probable and estimable losses but unable to predict ultimate resolution or estimate the range of possible losses for pending legal proceedings[190] Item 1A. Risk Factors No new risk factors were reported for the period - No new risk factors were disclosed in this quarterly report[191] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities during the quarter[192] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and XBRL data files - The report includes required exhibits such as CEO/CFO certifications (Sections 302 and 906 of Sarbanes-Oxley) and XBRL interactive data files[197]