Universal Technical Institute(UTI) - 2022 Q2 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements This report contains forward-looking statements about future events, financial performance, strategies, and competitive environment, involving risks that may cause actual results to differ materially - This report contains forward-looking statements regarding future events, financial performance, strategies, and competitive environment, which involve known and unknown risks and uncertainties that may cause actual results to differ materially[9][10] - Important factors that could cause actual results to differ include failure to comply with regulatory requirements, inability to maintain federal student financial assistance, continued Congressional examination of the for-profit education sector, and challenges in integrating acquisitions like MIAT College of Technology[11] Part I. Financial Information This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, shareholders' equity, and cash flows, along with detailed notes explaining accounting policies, significant acquisitions, revenue recognition, and other financial details for the periods ended March 31, 2022 and September 30, 2021 Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific points in time | Metric | March 31, 2022 (in thousands) | September 30, 2021 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Total Assets | $517,353 | $512,570 | +$4,783 | | Total Liabilities | $306,618 | $324,040 | -$17,422 | | Total Shareholders' Equity | $210,735 | $188,530 | +$22,205 | | Cash and cash equivalents | $61,498 | $133,721 | -$72,223 | | Property and equipment, net | $193,084 | $122,051 | +$71,033 | | Goodwill | $16,859 | $8,222 | +$8,637 | | Intangible assets | $16,273 | $124 | +$16,149 | Condensed Consolidated Statements of Operations This statement details the company's revenues, expenses, and net income or loss over specific reporting periods | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Six Months Ended March 31, 2022 (in thousands) | Six Months Ended March 31, 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $102,086 | $77,709 | $207,161 | $153,834 | | Total Operating Expenses | $98,709 | $79,370 | $190,206 | $154,720 | | Income (loss) from operations | $3,377 | $(1,661) | $16,955 | $(886) | | Net income (loss) | $7,354 | $(1,547) | $22,176 | $(464) | | Net income (loss) available for distribution | $6,060 | $(2,859) | $19,559 | $(3,089) | | Net income (loss) per share - basic | $0.11 | $(0.09) | $0.36 | $(0.09) | | Net income (loss) per share - diluted | $0.11 | $(0.09) | $0.36 | $(0.09) | Condensed Consolidated Statements of Other Comprehensive Income (Loss) This statement presents net income alongside other comprehensive income or loss items not recognized in net income | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Six Months Ended March 31, 2022 (in thousands) | Six Months Ended March 31, 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $7,354 | $(1,547) | $22,176 | $(464) | | Unrealized gain on interest rate swap | $861 | $0 | $1,034 | $0 | | Comprehensive income (loss) | $8,215 | $(1,547) | $23,210 | $(464) | Condensed Consolidated Statements of Shareholders' Equity This statement details changes in the company's equity components, including retained earnings and other comprehensive income | Metric | Balance as of September 30, 2021 (in thousands) | Balance as of March 31, 2022 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Total Shareholders' Equity | $188,530 | $210,735 | +$22,205 | | Retained Deficit | $(21,996) | $(2,437) | +$19,559 | | Accumulated Other Comprehensive Income (Loss) | $(279) | $755 | +$1,034 | Condensed Consolidated Statements of Cash Flows This statement reports the cash generated and used by the company from operating, investing, and financing activities | Metric | Six Months Ended March 31, 2022 (in thousands) | Six Months Ended March 31, 2021 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $10,400 | $17,527 | -$7,127 | | Net cash used in investing activities | $(79,475) | $(31,574) | -$47,901 | | Net cash used in financing activities | $(3,923) | $(3,090) | -$833 | | Change in cash, cash equivalents and restricted cash | $(72,998) | $(17,137) | -$55,861 | | Cash, cash equivalents and restricted cash, end of period | $72,979 | $71,782 | +$1,197 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering the nature of the business, accounting policies, significant acquisitions, revenue recognition, and other financial details Note 1 - Nature of the Business This note describes Universal Technical Institute's core business as a provider of transportation and technical training programs, primarily funded by federal financial aid - Universal Technical Institute, Inc. (UTI) is a leading provider of transportation and technical training programs, operating 14 campuses across the U.S. under brands like UTI, MMI, NASCAR Tech, and MIAT[33] - Revenues are primarily derived from student tuition and fees, largely funded by federal financial aid programs (Title IV) and veterans' benefits[34] - The company offers most programs in a blended learning model, combining online teaching with hands-on labs, which supported operations during the COVID-19 pandemic and aligns with increasing online education trends[35] Note 2 - Basis of Presentation This note outlines the preparation of unaudited condensed consolidated financial statements and significant accounting policy changes - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and do not include all disclosures required for complete financial statements[36] - A new significant accounting policy for goodwill and intangible assets was adopted, requiring annual impairment testing as of August 1st, or more frequently if events and circumstances warrant[39][40] - Intangible assets arising from the MIAT acquisition are now presented in a new line on the condensed consolidated balance sheet, with prior period reclassification for comparable presentation[43] Note 3 - Recent Accounting Pronouncements This note discusses the early adoption and evaluation of recent accounting standards, including ASU 2021-08 and ASU 2020-04 - The company early adopted ASU 2021-08 (Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers) as of October 1, 2021, applying it retrospectively to the deferred revenue recorded for the MIAT acquisition[45] - ASU 2019-12 (Income Taxes) was evaluated and determined to have no material impact on financial results[44] - The company is currently evaluating ASU 2020-04 (Reference Rate Reform) regarding the discontinuation of LIBOR for its term loan and will consider adopting this guidance when contract modification is required[46] Note 4 - Acquisition of MIAT College of Technology This note details the acquisition of MIAT College of Technology for $28.8 million cash, aimed at expanding programs and generating efficiencies - On November 1, 2021, UTI acquired MIAT College of Technology for a total cash consideration of $28.8 million, funded by available operating cash, as part of its growth and diversification strategy[47][49] - The acquisition is expected to expand MIAT programs throughout UTI brand campuses, extend UTI's presence, and generate operating and purchasing cost efficiencies[48] | MIAT Acquisition Purchase Price Allocation (as of Nov 1, 2021, in thousands) | Amount | | :--- | :--- | | Total Assets Acquired | $49,479 | | Less: Total Liabilities Assumed | $20,664 | | Net Assets Acquired | $28,815 | | Goodwill arising from acquisition | $8,637 | | Intangible assets acquired | $16,200 | Note 5 - Revenue from Contracts with Customers This note explains the company's revenue recognition policies for student tuition and fees, and presents contract balances - Revenues primarily consist of student tuition and fees, recognized ratably over the term of the course or program, with most UTI programs completed in 36 to 90 weeks and MIAT programs in 30 to 104 weeks[55] - Deferred revenue is considered a contract liability, representing advance payments for tuition not yet earned, and is expected to be earned within the next 12 months[58] | Contract Balances (in thousands) | March 31, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Receivables (incl. tuition and notes) | $45,601 | $46,489 | | Deferred revenue | $42,010 | $57,648 | Note 6 - Fair Value Measurements This note describes the company's use of a three-tier fair value hierarchy for valuing assets and liabilities - The company uses a three-tier fair value hierarchy (Level 1, 2, 3) to rank the quality and reliability of information used to measure fair value, with Level 1 for quoted prices in active markets, Level 2 for observable inputs, and Level 3 for unobservable inputs[60][63] | Assets at Fair Value (in thousands) | March 31, 2022 | September 30, 2021 | Fair Value Level | | :--- | :--- | :--- | :--- | | Money market funds | $57,109 | $62,100 | Level 1 | | Notes receivable | $36,283 | $36,124 | Level 3 | | Total assets at fair value | $93,392 | $98,224 | | Note 7 - Property and Equipment, net This note details the composition of property and equipment, including land, buildings, and training equipment, and related depreciation | Property and Equipment (in thousands) | March 31, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Total Property and equipment, net | $193,084 | $122,051 | | Land | $16,555 | $8,355 | | Buildings and building improvements | $118,335 | $71,036 | | Training equipment | $92,261 | $91,191 | - Depreciation expense related to property and equipment increased to $7.5 million for the six months ended March 31, 2022, from $6.8 million in the prior year[64] - On February 11, 2022, UTI acquired the remaining 72% interest in 2611 Corporate West Drive Venture LLC, which owns the Lisle, Illinois campus, for $28.4 million cash and assumed $18.3 million in debt[65] Note 8 - Goodwill This note outlines the changes in goodwill, primarily from the MIAT acquisition, and the updated impairment testing policy | Goodwill (in thousands) | March 31, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Balance at beginning of period | $8,222 | $8,222 | | Additions to Goodwill for acquisition of MIAT | $8,637 | $0 | | Balance at end of period | $16,859 | $8,222 | - The $8.6 million increase in goodwill is primarily from the MIAT acquisition, with the total goodwill of $16.9 million allocated to the Postsecondary Education segment[67] - Goodwill is now tested annually for impairment as of August 1st, a change from September 30th, with no impairment indicators as of March 31, 2022[68] Note 9 - Intangible Assets This note details the company's intangible assets, largely from the MIAT acquisition, including accreditations, trademarks, and curriculum | Intangible Assets (as of March 31, 2022, in thousands) | Gross Carrying Value | Net Book Value | Remaining Useful Life (Years) | | :--- | :--- | :--- | :--- | | Accreditations and regulatory approvals - MIAT | $12,800 | $12,800 | Indefinite | | Trademarks and trade names - MIAT | $3,000 | $3,000 | Indefinite | | Curriculum - MIAT | $400 | $367 | 4.58 | | Non-compete agreement and trade name | $442 | $106 | 3.08 | | Total | $16,642 | $16,273 | 4.23 | - The majority of intangible assets ($16.2 million) resulted from the MIAT acquisition, primarily consisting of indefinite-lived accreditations, regulatory approvals, and trademarks/trade names[69] - Amortization expense for finite-lived intangible assets was $51.1 thousand for the six months ended March 31, 2022, an increase from $17.7 thousand in the prior year[69] Note 10 - Investment in Unconsolidated Affiliate This note explains the dissolution of the investment in an unconsolidated affiliate following the acquisition of the Lisle Campus - The investment in an unconsolidated affiliate (a joint venture related to the Lisle Campus lease) was dissolved in February 2022, as UTI acquired the building, land, and debt associated with the campus[71] | Investment in Unconsolidated Affiliate (in thousands) | March 31, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Carrying Value | $0 | $4,627 | | Ownership Percentage | 0% | 28.0% | Note 11 - Leases This note describes the company's operating lease arrangements for campuses and headquarters, and the impact of the Lisle Campus acquisition - UTI leases 10 of its 14 currently operating campuses, two future campuses, and its corporate headquarters under non-cancelable operating leases, with terms ranging from 8 to 20 years[74] - The acquisition of the Lisle Campus in February 2022 resulted in the settlement of its operating lease liability and right-of-use asset at the consolidated level, generating a $1.6 million gain[75] | Lease Expense (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Six Months Ended March 31, 2022 | Six Months Ended March 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Operating lease expense | $6,371 | $5,458 | $12,734 | $11,590 | | Total net lease expense | $7,740 | $6,319 | $15,154 | $13,269 | Note 12 - Accounts Payable and Accrued Expenses This note provides a breakdown of the company's accounts payable and accrued expenses, including compensation and other liabilities | Accounts Payable and Accrued Expenses (in thousands) | March 31, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Accounts payable | $9,070 | $13,702 | | Accrued compensation and benefits | $29,545 | $29,506 | | Other accrued expenses | $16,532 | $11,189 | | Total | $55,147 | $54,397 | Note 13 - Debt This note details the company's debt structure, including the Avondale and Lisle Term Loans, and compliance with covenants | Debt (in thousands) | March 31, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Avondale Term Loan | $30,489 | $30,886 | | Lisle Term Loan | $18,106 | $0 | | Finance leases | $60 | $96 | | Total debt | $48,655 | $30,982 | - Total debt increased to $48.7 million as of March 31, 2022, primarily due to the assumption of an $18.3 million Lisle Term Loan in connection with the Lisle Campus acquisition[83][86] - The Avondale Term Loan bears interest at LIBOR plus 2.0%, while the Lisle Term Loan has a fixed rate of 5.293%; UTI was in compliance with all debt covenants as of March 31, 2022[85][86][87] Note 14 - Derivative Financial Instruments This note describes the company's use of an interest rate swap to hedge variable interest rate risk on its Avondale Term Loan - UTI uses an interest rate swap agreement, designated as an effective cash flow hedge, to fix the interest rate on 50% (approximately $15.6 million) of the Avondale Term Loan at 3.5% for its seven-year term, mitigating interest rate risk[90] - Changes in the fair value of the swap are recorded in 'Accumulated other comprehensive income (loss)' and reclassified to 'Interest expense' over the corresponding period of the underlying hedged item[91] | Effect of Cash Flow Hedge Accounting (Six Months Ended March 31, 2022, in thousands) | Amount | | :--- | :--- | | Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative | $927 | | Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Interest expense) | $(107) | Note 15 - Income Taxes This note presents the company's income tax benefit and effective tax rate, highlighting the impact of valuation allowance reversal | Income Tax Benefit (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Six Months Ended March 31, 2022 | Six Months Ended March 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Income tax benefit | $4,598 | $34 | $5,945 | $8 | | Effective income tax rate | (166.8)% | 2.2% | (36.6)% | 1.7% | - The significant income tax benefit for the three and six months ended March 31, 2022, was primarily due to the reversal of a majority of the valuation allowance against deferred tax assets, driven by sustained positive earnings[95][96] Note 16 - Commitments and Contingencies This note addresses the company's exposure to lawsuits, investigations, regulatory proceedings, and other claims in the ordinary course of business - The company is periodically subject to lawsuits, investigations, regulatory proceedings, and other claims in the ordinary course of business; while liabilities are accrued for probable and estimable losses, the ultimate outcome cannot be predicted with certainty and may materially affect the business[97] - The Consumer Financial Protection Bureau (CFPB) is assessing whether UTI is subject to its supervisory authority based on student lending activities and has requested information[98] Note 17 - Shareholders' Equity This note details the company's common and preferred stock, dividend policies, and share repurchase plan - Common stock holders are entitled to dividends as declared by the Board, but any future common stock dividends require the approval of a majority of the voting power of the Series A Preferred Stock[99] - 700,000 shares of Series A Convertible Preferred Stock are outstanding with a liquidation preference of $100 per share, and cash dividends of $2.6 million were paid semi-annually[100][101] - The company believes it may be eligible within 12 months to automatically convert outstanding Series A Preferred Stock into common stock, subject to obtaining required stockholder and regulatory approvals[102] - A share repurchase plan of up to $35.0 million was authorized in December 2020, but no shares have been repurchased under this program as of March 31, 2022[103] Note 18 - Earnings per Share This note explains the calculation of basic and diluted earnings per share, considering the Series A Preferred Stock as a participating security - Basic EPS is calculated using the two-class method due to the Series A Preferred Stock being a participating security, while diluted EPS uses the more dilutive of the two-class method or as-converted method[104][105] | Earnings per Share (EPS) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Six Months Ended March 31, 2022 | Six Months Ended March 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Basic income (loss) per common share | $0.11 | $(0.09) | $0.36 | $(0.09) | | Diluted income (loss) per common share | $0.11 | $(0.09) | $0.36 | $(0.09) | | Weighted average basic shares outstanding | 32,992 | 32,762 | 32,920 | 32,709 | | Weighted average diluted shares outstanding | 33,436 | 32,762 | 33,393 | 32,709 | Note 19 - Segment Information This note provides financial information by operating segment, primarily 'Postsecondary Education,' and details corporate expense allocation - The company's principal business is 'Postsecondary Education,' with manufacturer-specific training and other non-postsecondary education operations reflected in the 'Other' category[108] | Segment Performance (Six Months Ended March 31, 2022, in thousands) | Postsecondary Education | Other | Consolidated | | :--- | :--- | :--- | :--- | | Revenues | $200,352 | $6,809 | $207,161 | | Income (loss) from operations | $18,023 | $(1,068) | $16,955 | | Total assets (as of March 31, 2022) | $514,105 | $3,248 | $517,353 | - Corporate expenses are allocated to 'Postsecondary Education' and the 'Other' category based on compensation expense[108] Note 20 - Government Regulation and Financial Aid This note discusses the extensive federal and state regulations governing the company's participation in student financial aid programs - UTI's institutions participate in federal student aid programs (Title IV) and veterans' benefits programs, requiring compliance with extensive state and federal regulations, including state authorization, accreditation, and financial responsibility standards[111][112][114][115] - Key regulatory factors include the 90/10 Rule (requiring 10% of revenue from non-Title IV sources), administrative capability standards, three-year student loan default rates, and financial responsibility composite scores[116] - The company is monitoring proposed changes to the 90/10 rule and other Title IV Program rulemaking efforts by the U.S. Department of Education, which are likely to become effective July 1, 2023[116][117] - UTI has received permanent approvals from ACCSC and all state education authorizing agencies to offer blended learning programs, which combine distance and on-ground education[123] Note 21 - Higher Education Emergency Relief Fund Grants This note reports on the distribution of HEERF II and HEERF III grants to students and remaining available funds - During the six months ended March 31, 2022, UTI awarded approximately $5.0 million in HEERF II and HEERF III grants to over 4,100 students, with approximately $1.9 million of funds still available[126] - These grants are part of federal COVID-19 relief legislation (CRRSAA and ARPA) aimed at providing emergency financial aid to students, particularly those with exceptional need[124][125] Note 22 - Subsequent Events This note discloses significant events occurring after the reporting period, including debt refinancing and a new acquisition agreement - In April 2022, the Lisle Campus's assumed term loan of $18.3 million was repaid and replaced with a new $38.0 million term loan from Valley National Bank, bearing interest at one-month SOFR plus 2.0%, with 50% hedged by an interest rate swap at 4.69%[128][129][130] - On May 3, 2022, UTI entered into a definitive agreement to acquire Concorde Career Colleges, Inc. for a base purchase price of $50.0 million in cash, subject to customary closing conditions including U.S. Department of Education approval[131][133] - Concorde operates 17 campuses across eight states, offering healthcare education programs, and the acquisition is expected to close during the first half of UTI's fiscal 2023[131][133] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and operational results for the three and six months ended March 31, 2022, compared to the prior year. It covers student metrics, revenue drivers, operating expenses, strategic initiatives, liquidity, and critical accounting policies Company Overview This section provides an overview of Universal Technical Institute's business, training programs, accreditation, and industry partnerships - Universal Technical Institute, Inc. (UTI) is a leading provider of transportation and technical training programs, operating 14 campuses under various brands and having graduated approximately 250,000 students since 1965[137] - All campuses are nationally accredited and eligible for federal student financial assistance funds under Title IV Programs, as well as from the U.S. Department of Veterans Affairs and the Workforce Investment Act[138] - UTI maintains relationships with over 35 original equipment manufacturers (OEMs) and industry brand partners to continuously refine programs, providing students with in-demand skills and enhanced employment opportunities[139] - The company offers the majority of its programs in a blended learning model, combining instructor-facilitated online teaching with hands-on labs, which has allowed for continued program delivery during the COVID-19 pandemic[141] Overview of the Three and Six Months Ended March 31, 2022 This section summarizes the company's financial and operational performance, including student metrics, revenue growth, and strategic initiatives | Student Metrics | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | % Change | Six Months Ended March 31, 2022 | Six Months Ended March 31, 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total new student starts | 2,275 | 2,405 | (5.4)% | 4,247 | 4,332 | (2.0)% | | Average undergraduate full-time active students | 12,903 | 11,356 | 13.6% | 13,316 | 11,585 | 14.9% | | End of period undergraduate full-time active students | 12,466 | 10,945 | 13.9% | 12,466 | 10,945 | 13.9% | - Revenues for the three months ended March 31, 2022, increased by 31.4% to $102.1 million, and for the six months, increased by 34.7% to $207.2 million, driven by student growth, increased revenue per student, and the acquisition of MIAT[145] - Income from operations significantly improved, reaching $3.4 million and $17.0 million for the three and six months, respectively, compared to losses in the prior year, primarily due to increased revenue and ongoing efficiency initiatives[146] - Key strategic initiatives executed during the period include the acquisition of MIAT College of Technology, launching electric vehicle (EV) technician training coursework, forming a strategic alliance with NAPA Auto Parts, and purchasing the Lisle, Illinois campus[148][154] Results of Operations: Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021 This section analyzes the company's financial performance for the three months ended March 31, 2022, focusing on revenue growth, expense changes, and net income improvement | Metric (as % of revenues) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Revenues | 100.0% | 100.0% | | Educational services and facilities | 48.2% | 52.1% | | Selling, general and administrative | 48.5% | 50.0% | | Income (loss) from operations | 3.3% | (2.1)% | | Net income (loss) | 7.2% | (2.0)% | - Revenues increased by $24.4 million (31.4%) to $102.1 million, primarily due to a 13.6% increase in average undergraduate full-time active students, higher revenue per student, and $6.5 million from the MIAT acquisition[155] - Educational services and facilities expenses increased by $8.7 million to $49.2 million, driven by higher compensation costs (+$4.7 million, including $2.5 million from MIAT), increased occupancy costs (+$2.0 million for new campuses and MIAT), and higher supplies and maintenance (+$1.2 million)[156][157][158][159] - Selling, general and administrative expenses rose by $10.6 million to $49.5 million, mainly due to increased compensation (+$3.2 million, including $0.8 million from MIAT), higher advertising (+$3.0 million, including $1.5 million from MIAT), and increased professional services (+$2.0 million)[162][163][164] - Net income available for distribution was $6.1 million, a significant improvement from a $2.9 million net loss in the prior year, largely due to the income tax benefit from the release of a valuation allowance[168] Results of Operations: Six Months Ended March 31, 2022 Compared to Six Months Ended March 31, 2021 This section analyzes the company's financial performance for the six months ended March 31, 2022, detailing revenue growth, expense changes, and net income improvement | Metric (as % of revenues) | Six Months Ended March 31, 2022 | Six Months Ended March 31, 2021 | | :--- | :--- | :--- | | Revenues | 100.0% | 100.0% | | Educational services and facilities | 46.9% | 51.9% | | Selling, general and administrative | 44.9% | 48.7% | | Income (loss) from operations | 8.2% | (0.6)% | | Net income (loss) | 10.7% | (0.3)% | - Revenues increased by $53.3 million (34.7%) to $207.2 million, primarily due to a 14.9% increase in average full-time student enrollment, higher revenue per student, and $11.6 million from the MIAT acquisition[171] - Educational services and facilities expenses increased by $17.3 million to $97.1 million, driven by higher compensation (+$8.3 million, including $3.9 million from MIAT), increased occupancy costs (+$2.8 million for new campuses and MIAT), and higher supplies and maintenance (+$2.4 million)[172][173][174][175] - Selling, general and administrative expenses rose by $18.2 million to $93.1 million, mainly due to increased compensation (+$5.6 million, including $1.6 million from MIAT), higher advertising (+$5.3 million, including $2.2 million from MIAT), and increased professional services (+$2.7 million)[178][179][180][181] - Net income available for distribution was $19.6 million, a significant improvement from a $3.1 million net loss in the prior year, largely due to the income tax benefit from the release of a valuation allowance[184] Non-GAAP Financial Measures This section presents EBITDA as a non-GAAP financial measure to provide supplemental insight into the company's operational performance and trends - EBITDA is presented as a non-GAAP financial measure to supplement GAAP results, clarify operations, identify underlying trends, and compare performance consistently across time periods[186] | EBITDA (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Six Months Ended March 31, 2022 | Six Months Ended March 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $7,354 | $(1,547) | $22,176 | $(464) | | EBITDA | $7,098 | $1,981 | $24,473 | $6,320 | - EBITDA increased significantly to $7.1 million for the three months and $24.5 million for the six months ended March 31, 2022, compared to $2.0 million and $6.3 million in the prior year periods, respectively[185] Liquidity and Capital Resources This section discusses the company's ability to meet its financial obligations and fund growth initiatives through cash flows, cash on hand, and investments - The company believes its cash flows from operations, cash on hand, and investments will satisfy working capital needs, capital expenditures, and growth initiatives for the next 12 months[188] - Cash and cash equivalents decreased by $72.2 million to $61.5 million as of March 31, 2022, primarily due to strategic uses of cash for acquisitions[189] - Strategic uses of cash included the $28.8 million acquisition of MIAT and the $28.4 million purchase of the Lisle Campus[190][191] - Net cash provided by operating activities decreased to $10.4 million for the six months ended March 31, 2022, from $17.5 million in the prior year, mainly due to a $17.5 million decrease in deferred revenue[196][203] - Net cash used in investing activities increased significantly to $79.5 million, primarily due to $53.2 million for property and equipment purchases (including Lisle Campus) and $26.5 million for the MIAT acquisition[199] Seasonality and Trends This section describes how seasonal variations in student population impact the company's operating results and revenues - Operating results normally fluctuate due to seasonal variations in student population, with lower student numbers in the third quarter (summer months) and higher in the fourth quarter[203][204] - Expenses do not vary significantly with changes in student population and revenues, leading to quarterly fluctuations in operating results[204] Critical Accounting Policies and Estimates This section highlights the company's critical accounting policies and estimates, particularly regarding goodwill and indefinite-lived intangible assets impairment testing - No significant changes in critical accounting policies and estimates were reported for the six months ended March 31, 2022, other than the updated goodwill and intangible assets policy[205] - Goodwill and indefinite-lived intangible assets are tested annually for impairment as of August 1st, involving qualitative and quantitative assessments based on significant estimates like future tuition revenues, operating costs, and discount rates[206] Recent Accounting Pronouncements This section refers readers to Note 3 for detailed information on recent accounting pronouncements - For information regarding recent accounting pronouncements, refer to Note 3 of the notes to the condensed consolidated financial statements[208] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily related to changes in interest rates, and the strategies employed to mitigate these risks, such as investing in money market funds and using interest rate swap agreements for variable-rate debt - The company's principal exposure to market risk relates to changes in interest rates, with cash and cash equivalents of $61.5 million as of March 31, 2022, invested in money market funds[209][210] - To mitigate variable interest rate exposure on the Avondale Term Loan (LIBOR plus 2.0%), an interest rate swap agreement effectively fixes the interest rate on 50% (approximately $15.6 million) of the principal at 3.5% for the loan term[211][212] - A hypothetical 1.0% change in the one-month LIBOR would result in a $0.2 million change to the annual interest expense for the portion of the long-term debt not hedged by the interest rate swap agreement[213] - The Lisle Term Loan, assumed in February 2022 with a principal balance of $18.3 million, has a fixed interest rate of 5.293%, thus not subject to variable rate risk[212] Item 4. Controls and Procedures Management, including the Chief Executive Officer and Chief Financial Officer, concluded that disclosure controls and procedures were effective as of March 31, 2022, ensuring timely and accurate reporting. No changes in internal control over financial reporting were identified during the quarter - Management, including the Chief Executive Officer and Chief Financial Officer, evaluated and concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[214] - No changes in internal control over financial reporting were identified during the three months ended March 31, 2022[215] - Management acknowledges that control systems provide only reasonable, not absolute, assurance against error and fraud due to inherent limitations such as faulty judgments, simple errors, collusion, or management override[216] Part II. Other Information This section provides disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, and other miscellaneous information Item 1. Legal Proceedings The company is periodically involved in various legal proceedings, investigations, and claims in the ordinary course of business. While the ultimate outcome cannot be predicted with certainty, the company accrues liabilities for probable and estimable losses - The company is periodically subject to lawsuits, arbitrations, investigations, regulatory proceedings, or other claims in the ordinary conduct of its business[218] - A liability is accrued if a loss is probable and can be reasonably estimated; however, the ultimate outcome of pending legal proceedings cannot be predicted with certainty and may have a material adverse effect on the business[218] Item 1A. Risk Factors This section indicates that there are no new material risk factors for the current reporting period, referring readers to the 2021 Annual Report on Form 10-K for a comprehensive discussion of risks - No new material risk factors are reported in this quarterly filing[219] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds occurred during the reporting period - No unregistered sales of equity securities and no use of proceeds were reported during the period[220] Item 3. Defaults upon Senior Securities No defaults upon senior securities were reported during the period - No defaults upon senior securities were reported during the period[221] Item 4. Mine Safety Disclosures No mine safety disclosures are applicable or reported for the period - No mine safety disclosures were reported[222] Item 5. Other Information No other information is reported in this section - No other information was reported in this section[223] Item 6. Exhibits This section lists all exhibits filed or furnished with the Form 10-Q, including various purchase and sale contracts, loan agreements, guaranties, certifications, and XBRL documents - Exhibits include purchase and sale contracts, loan agreements, repayment guaranties, and certifications from the Chief Executive Officer and Chief Financial Officer[226] - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase Documents are also filed[226] Signatures This section confirms the official signing of the report by the principal executive officer - The report was duly signed on May 5, 2022, by Jerome A. Grant, Chief Executive Officer (Principal Executive Officer) of Universal Technical Institute, Inc.[230]