Universal Technical Institute(UTI) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarter ended December 31, 2020, detailing financial position, operating results, cash flows, and significant accounting policies Condensed Consolidated Balance Sheets As of December 31, 2020, total assets were $434.6 million, a slight decrease from $442.0 million, primarily driven by a reduction in cash and cash equivalents due to a property purchase, partially offset by an increase in net property and equipment Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2020 | Sep 30, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $44,212 | $76,803 | | Total current assets | $130,561 | $180,179 | | Property and equipment, net | $116,637 | $72,743 | | Total assets | $434,587 | $441,981 | | Liabilities & Equity | | | | Total current liabilities | $112,486 | $121,640 | | Total liabilities | $256,281 | $265,459 | | Total shareholders' equity | $178,306 | $176,522 | Condensed Consolidated Statements of Operations For the three months ended December 31, 2020, revenues decreased to $76.1 million, operating income fell sharply to $0.8 million, and the company reported a net loss available for distribution of $0.2 million, resulting in a basic and diluted loss per share of ($0.01) Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | | :--- | :--- | :--- | | Revenues | $76,125 | $87,234 | | Income from operations | $775 | $4,254 | | Net income | $1,083 | $4,684 | | Net (loss) income per share - basic | $(0.01) | $0.07 | | Net (loss) income per share - diluted | $(0.01) | $0.07 | Condensed Consolidated Statements of Cash Flows For the three months ended December 31, 2020, net cash provided by operating activities was $7.8 million, while net cash used in investing activities was a significant $37.2 million, primarily due to a property purchase, resulting in a quarter-end cash balance of $59.2 million Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,783 | $7,124 | | Net cash used in investing activities | $(37,249) | $(1,719) | | Net cash used in financing activities | $(210) | $(497) | | Change in cash, cash equivalents and restricted cash | $(29,676) | $4,908 | Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations for the financial statements, covering the impact of COVID-19, significant property acquisitions, share repurchase authorizations, and the utilization of CARES Act and HEERF funds - The company is a leading provider of postsecondary technical education for automotive, diesel, collision repair, motorcycle, and marine technicians, with a majority of students relying on federal financial aid programs (Title IV)[26][27] - Due to COVID-19, the transition to a blended learning model led to delays in student lab work completion, resulting in approximately $2.0 million in deferred revenue as of December 31, 2020[41] - The company purchased the land and building for its Avondale, Arizona campus for approximately $45.2 million during the quarter[47] - A new share repurchase plan authorized on December 10, 2020, allows for the repurchase of up to $35.0 million of common stock, with no shares repurchased during the quarter[71] - The company utilized the remaining $0.9 million of institutional HEERF funds from the CARES Act and anticipates an additional $16.8 million in student grants under HEERF II[101][102] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 12.7% revenue decrease attributed to COVID-19 impacts on student progression, offset by expense controls and strategic initiatives, while maintaining a strong liquidity position despite a significant campus acquisition Overview of Operations and Business Strategy Despite the COVID-19 pandemic, the company saw increased enrollment and new student starts, but revenue declined due to delays in student lab progression, while strategic actions included new technician programs, campus acquisitions, and consolidations Key Operational Metrics (Q1 FY2021 vs Q1 FY2020) | Metric | Change | | :--- | :--- | | Average undergraduate full-time enrollment | +1.8% | | New student starts | +20.9% | - Key strategic initiatives included: - Launching the Premier Truck Group Technician Skills Program at Fort Bliss - Expanding the Daimler Trucks North America (DTNA) Finish First program to the Orlando campus - Purchasing the Avondale, Arizona campus for approximately $45.2 million with plans to consolidate the MMI Phoenix campus into it - Announcing the consolidation of the UTI and MMI Orlando campus facilities[115] Results of Operations Revenue for the quarter decreased by 12.7% to $76.1 million due to COVID-19 impacts on student progression, partially offset by reductions in educational services and facilities expenses and SG&A expenses, though operating income still fell significantly Comparison of Operating Results (in thousands) | Item | Q1 FY2021 | Q1 FY2020 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $76,125 | $87,234 | (12.7)% | | Educational services and facilities | $39,331 | $42,876 | (8.3)% | | Selling, general and administrative | $36,019 | $40,104 | (10.2)% | | Income from operations | $775 | $4,254 | (81.8)% | - The revenue decrease was primarily due to the timing of student lab work completion and lower average revenue per student, driven by the pace of program progression and course retakes due to COVID-19 impacts[118] - EBITDA, a non-GAAP measure, was $4.3 million for the quarter, compared to $7.8 million in the prior-year period[131][133] Liquidity and Capital Resources The company maintains a strong liquidity position with $44.2 million in cash and $27.9 million in investments, despite a significant decrease in cash primarily due to the $45.2 million purchase of the Avondale, Arizona campus Liquidity Position (in millions) | Item | Dec 31, 2020 | Sep 30, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $44.2 | $76.8 | | Short-term held-to-maturity investments | $27.9 | $38.1 | - The primary use of cash was the purchase of the Avondale, Arizona campus for approximately $45.2 million, funded with available operating cash[137][144] - Net cash provided by operating activities was $7.8 million, an increase from $7.1 million in the prior year period, primarily due to favorable changes in working capital such as a decrease in receivables[142] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk exposure since the end of the previous fiscal year on September 30, 2020 - There have been no material changes to the company's market risk since September 30, 2020[151] Controls and Procedures Based on management's evaluation, the company's disclosure controls and procedures were effective as of December 31, 2020, with no material changes to internal control over financial reporting except for new controls related to ASC 326 adoption - The CEO and CFO concluded that disclosure controls and procedures were effective as of December 31, 2020[152] - No significant changes were made to internal controls over financial reporting, except for new controls related to the adoption of ASC 326 (Financial Instruments—Credit Losses)[153] PART II. OTHER INFORMATION Legal Proceedings The company is subject to various ordinary course legal proceedings, for which it cannot currently estimate the potential range of loss, and an adverse outcome could materially affect the business - The company is subject to ordinary course legal proceedings and cannot currently estimate the potential range of loss for pending claims[156] Risk Factors Investors are directed to the 2020 Annual Report on Form 10-K for a comprehensive understanding of risk factors that could materially affect the company's business, financial condition, or operating results - The report refers to the risk factors detailed in the 2020 Annual Report on Form 10-K for a comprehensive understanding of potential risks[157] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the quarter - No unregistered sales of equity securities or use of proceeds occurred during the quarter[158] Exhibits This section lists the exhibits filed with the Form 10-Q, including the Asset Purchase and Sale Agreement for the Avondale, AZ property, CEO and CFO certifications, and XBRL data files - Exhibits filed include: - Asset Purchase and Sale Agreement for the Avondale, AZ campus - CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act) - XBRL Instance Document and related taxonomy files[163]