UNIVERSAL TECHNICAL INSTITUTE

Transcription

1 2008 BMO Capital Markets 8th Annual Back to School Education Conference UNIVERSAL TECHNICAL INSTITUTE 1 September 10, 2008

2 Safe Harbor This presentation may include predictions, estimates or other information that may be considered forward looking under the Safe Harbor provision of the Private Securities Litigation Reform Act of Such statements are based on UTI s last data reported and have not been updated to reflect any changes that may have occurred since our last reporting date. Any forward looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forwardlooking statements. Factors that could affect the company s actual results include changes to federal and state educational funding, possible failure or inability to obtain regulatory consents and certifications for new campuses, potential increased competition, changes in demand for the programs offered by the company, increased investment in management and capital resources, the effectiveness of the company s recruiting, advertising and promotional efforts, changes to interest rates, and low unemployment. Further information on these and other potential factors that could affect the company s financial results may be found in the company s filings with the Securities and Exchange Commission. 2

3 UTI at a Glance Founded in 1965 Leading brands in technical education FY2007 Average enrollment approx. 15,900 Training programs Auto Diesel Collision Repair Motorcycle/Marine FY2007 revenues of $353.4 million 3

4 Trends Driving Technician Demand Industry size & growth (1) 1.3 million technicians 43,600 annual new openings Evolving technologies Increased focus on parts & service (2) 11.9% auto dealer revenue 77.0% auto dealer operating profits 17.2% of service sales is warranty repair Source: (1) BLS Employment Outlook Summary, November 2007 (2) Productive technicians drive profitability. UTI is the leading supplier of skilled, entry-level technicians to industry.

5 What do Students Learn at UTI? How to fix a V-ROD engine and become a Harley-Davidson technician. 5 UTI s Motorcycle Mechanics Institute has supplied Harley- Davidson with technicians since the early 1980 s.

6 What do Students Learn at UTI? How to build a race car chassis and become a NASCAR technician. 6 Today, approximately, 18% of NASCAR Tech graduates accept employment in racing-related industries.

7 What do Students Learn at UTI? How to get under the hood of a big rig and become a heavy-duty diesel technician. 7 Diesel and industrial technology programs are offered at UTI locations in AZ, CA, IL, MA, PA, TX.

8 What do Students Learn at UTI? How to work on hybrid vehicles and become a Toyota credentialed technician. 8 The Toyota elective is currently offered at the Illinois, California and Pennsylvania campuses.

9 What do Students Learn at UTI? How to perform a wheel alignment and become an Audi credentialed technician. 9 Audi is one of 7 graduate level training programs offered free, through OEM sponsorship, to UTI s top graduates.

10 Where do They Learn? NORWOOD SACRAMENTO EXTON RANCHO CUCAMONGA AVONDALE PHOENIX GLENDALE HEIGHTS MOORESVILLE HOUSTON ORLANDO 10 We recruit and place students in all 50 states, enabling us to serve the needs of our industry customers nationwide.

11 Why do Students Choose UTI? Because of our quality reputation and unique relationships with industry leaders. Relationships provide students with: An enhanced educational experience Potential tuition reimbursement / sponsorship Access to better career opportunities Increased earning potential 11 UTI has built relationships with more than 20 OEM s which allows us to provide better opportunities for our students.

12 What is an Industry Relationship? Original equipment manufacturer provides: Proprietary curriculum & equipment Instructor training and certification Training vehicles Two types Elective student paid Graduate OEM paid 12 Based on our relationships, UTI is best prepared to serve the needs of OEM s, employers and our students.

13 UTI has Steadily Built Relationships Over Time Harley-Davidson Kawasaki American Honda Honda Marine Suzuki Yamaha Motorcycle Automotive Marine Diesel Harley-Davidson Kawasaki American Honda Honda Marine Suzuki Yamaha BMW Harley-Davidson Kawasaki American Honda Honda Marine Suzuki Yamaha BMW Mercedes-Benz Jaguar Ford Porsche Volkswagen NASCAR Audi Volvo Volvo-Penta Mercury Marine International Harley-Davidson Kawasaki American Honda Honda Marine Suzuki Yamaha BMW Mercedes-Benz Jaguar Ford Porsche Volkswagen NASCAR Audi Volvo Toyota Volvo-Penta Mercury Marine International Harley-Davidson Kawasaki American Honda Honda Marine Suzuki Yamaha BMW Motorcycle BMW Mercedes-Benz Ford Porsche Volkswagen NASCAR Audi Volvo Toyota Nissan Volvo-Penta Mercury Marine International Cummins Freightliner 13 UTI has developed industry relationships in all of the verticals it serves; yet opportunity for further development remains.

14 Who is Missing from Our List? Automotive Chrysler General Motors Honda Hyundai Diesel / Industrial Caterpillar John Deere PACCAR (Kenworth/Peterbilt) Volvo-Mack 14 Significant opportunity exists to develop new relationships with industry leaders.

15 How the Competition Stacks up to UTI Audi BMW Cummins Ford Freightliner Harley-Davidson Honda Motorcycle Honda Marine International Kawasaki Mercedes-Benz Mercury Marine NASCAR Nissan Porsche Suzuki Toyota Volkswagen Volvo Volvo-Penta Yamaha UTI LINC WYO Community Colleges 15 The depth and breadth of our industry relationships are unmatched.

16 Leading Supplier of Motorcycle Technicians Elective Course Mix FY % 18% 4% 29% 13% 20% % of MMI graduates have manufacturer-specific training.

17 Auto / Diesel Electives Benefit Students & UTI ($ in millions) 2,500 $15 2,000 Graduates 1,500 1, Program Start Date CRRT Automotive $10 $5 $0 Incremental Revenues Revenue *Nissan and International Truck programs were established in late FY2006 and mid-fy2007, respectively. Cummins accreditation is pending. Therefore, there are no graduates from these programs in the years depicted. 17 OEM branded electives drive profitable revenue growth over time. Many elective programs have yet to mature.

18 UTI Is The Primary and Often Sole Provider of Graduate Level Training Graduate Percentage by Brand FY 2007 Must qualify Free tuition 13% 8% 15% 16% Employment commitment 2% 8% 90% UTI grads 38% 18 Students who want graduate level training must eventually come through UTI. BMW is the only exception.

19 Industry Orientation Improves Employment Quality Where Auto Techs Work* Where UTI Graduates Work** Strong Student Value Proposition $41,140 (2) $34,188 (1) 71% 29% 49% 51% $23,428 (1) Dealers Other Automotive Dealerships Other H.S. Graduate Auto Technician Dealer College Graduate * Bureau of Labor Statistics reported in 2006 ** UTI automotive graduates FY2006 (1) Mean earnings for year old age group as reported by the U.S. Census Bureau for 2006 (2) Mean annual wage for all employed automotive technicians as reported by the U.S Dept. of Labor, May Average auto tech working at a dealer earns 75% more than the average high school graduate.

20 20 Challenges and Opportunities

21 Perfect Storm FY05-FY07 Increased seating capacity Increased available seats by approx. 35% since FY2004 The economic cycle Low unemployment rates negatively impacted student recruitment efforts Affordability Average tuition $25,000 Annual tuition increases and rising interest rates Increase in funding gap up to 50% unfunded Internal execution challenges Marketing and lead generation Sales force practices Financial aid processes 21 We generated an insufficient number of contracts to produce acceptable start growth resulting in a decline in student populations.

22 Financial Performance ($ in millions, except for enrollment data and EPS) 9 Months Ended Fiscal Year Ended September 30, 6/30/2008 6/30/ Average enrollment 15,018 15,998 15,856 16,291 15,390 13,076 Growth -6.1% -2.0% -2.7% 5.9% 17.7% 23.7% Net revenues $258.8 $266.4 $353.4 $347.1 $310.8 $255.1 Growth -2.8% 3.1% 1.8% 11.7% 21.8% 29.9% Operating income $10.2 $25.7 $23.8 $40.7 $55.8 $50.1 Margin 3.9% 9.6% 6.7% 11.7% 17.9% 19.6% Capacity Utilization 60.0% 62.7% 62.2% 64.9% 69.9% 70.2% Diluted EPS $0.30 $0.62 $0.57 $0.97 $1.26 $ Significant operating leverage exists with improved utilization rates.

23 Lead Generation Researched student segments Reinvented marketing strategy Launched in January 2008 Improved search engine optimization Implemented new national advertising campaign Emphasizes more efficient and effective media buying Moved from long form television advertising to traditional short form Outsourced media buying 23 Our new web-centric strategy and national advertising campaign are producing significant results.

24 Sales and Student Contracts Campus Sales young adult recruiting Restructured management team in September 2007 Decentralized the reporting structure Redesigned the sales process and staff development Field Sales high school recruiting Realigned territories and changed lead distribution policy during summer of 2007 Invested in staff development 24 Combined, our sales teams achieved 21% YOY growth in contracts for the third quarter, marking the first quarter of 20% growth since FY05 Q1.

25 Show Rate Student Finance Outsourced front-end financial aid process in October 2007 Invested in training staff to improve customer service Expanded lender lists Launched private loan program Future Student Services Invested in development of leaders and staff 25 After several quarters of declining show rates, the show rate stabilized in our first quarter of 2008 proving our efforts are paying off.

26 Student Sources of Funding CY 2007 Breakdown by % of Students Require Some Discount Alt. Loan 10.3% Require Some Private Alt. Loan 24.7% Fully Funded Through FFELP & PELL 42.2% Meet Gap With Cash Payments 22.8% 26 Accessibility and affordability of student funding has improved.

27 Private Loan Program Board of Directors approved $10 million loan program Students unable to qualify for credit-based alternative loans Loans at reasonable interest rates and terms UTI bears all credit and collection risk No meaningful P&L or balance sheet impact 27 At current capacity utilization, students in the private loan program are still profitable.

28 Positive Legislative Changes College Cost Reduction & Access Act Pell Grants increase approximately $400 for maximum award of $4,700 for award year Ensuring Continued Access to Student Loan Act Unsubsidized Stafford loans increase $2,000 per academic year for a total of approximately $4,000 for UTI students Parents can defer payments on PLUS loans until 6 months after student leaves school Reauthorization of Higher Education Act Pell grants maximum increase approximately $1,200 for award year and scheduled increases to maximum of $8,000 by award year Unsubsidized Stafford loan increases will be included in the 10% portion of the 90/10 calculation Simplified FAFSA for low income students 28 These changes will reduce the PLUS loan need for dependent students and reduce the alternative loan need for independent students.

29 Key Metrics to Drive Revenue Lead 1-4 Months Contract 1-12 Months Start Months Graduation Priorities 1. Increasing starts and improving show rates 2. Rebuilding average student populations 3. Continuing to increase leads and contracts 29 It can take up to 36 months for students to move through the revenue cycle.

30 Leading Indicators Are Improving Improved lead generation Leads have improved year over year since March 2008 FY08 Q3 leads increased 41% FY08 Q3 cost per lead decreased 10% Campus Sales young adult recruiting Since January 2008, campus contracts have steadily improved FY08 Q3 campus contracts increased 45% Field Sales high school recruiting Field contracts stabilized in April 2008 FY08 Q3 field contracts increased 2% with 9 fewer reps Show rate and starts Show rate stabilized in FY08 Q1 FY08 Q3 show rate improved 530 basis points FY08 Q3 starts increased 0.5% 30 The front-end drivers of the business are moving in the right direction; however it will take several quarters to rebuild student populations.

31 Return to Historical Operating Margins Reinvent marketing strategy Improve student funding accessibility and affordability Implement redesigned sales process Campus Field Invest in customer service training IMPROVE FINANCIAL RESULTS Completed Ongoing 31 Significant efforts are underway; however, the full benefit of these initiatives is yet to be realized.

32 Summary Superior business strategy / relationships Strong value proposition Overcoming challenging external environment Focused on execution Stronger, more efficient and effective organization 32 UTI is an enduring brand due to its compelling value proposition for both students and industry.

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34 34 Appendix

35 Strong Demand in All End Markets Automotive Industry size: 772,675 14% growth by 2016 Annual new openings: 26,500 Diesel Industry size: 274,876 12% growth by 2016 Annual new openings: 9,100 CRRT Industry size: 182,676 12% growth by 2016 Annual new openings: 6,400 Marine/Motorcycle Industry size: 45,325 14% growth by 2016 Annual new openings: 1,600 Key Statistics Overall market growth of 12% 14% by 2015 Annual new job openings of 43,600 Source: BLS Employment Outlook Summary, November

36 Student Sources of Funding FY 2007 Breakdown by % of Revenue Discount Alt. Loans 2.3% Private Alt. Loans 11.8% CTG & Other 5.8% Cash / Credit Cards 17.3% FFELP - Federal Loans & Pell Grants 62.8% 36 Approximately 80% of our revenues come from Title IV funding or cash payments.