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SCOTTSDALE, Ariz., Dec. 2, 2019 /PRNewswire/ -- Universal Technical Institute, Inc. (NYSE: UTI), the leading provider of transportation technician training, reported financial results for the fiscal 2019 fourth quarter and full year ended September 30, 2019.

• Fourth quarter revenue increased 9.2% versus the prior year quarter to $87.7 million, driving fiscal 2019 revenue to $331.5 million, up 4.6% versus the prior year.
• New student starts, excluding the Norwood, MA campus, were up 10.4% for the fourth quarter and 11.5% for fiscal 2019 as compared to the respective prior year periods.
• Fourth quarter operating income of $5.4 million improved $16.5 million from the prior year quarter loss, while the full year operating loss of $7.8 million improved $27.5 million year over year.
• UTI expects fiscal 2020 revenue growth of between 2.0% and 4.0% versus fiscal 2019, which, along with continued cost optimization, is expected to position UTI to be profitable for the full year and increase cash flow versus fiscal 2019.

"UTI delivered start growth every quarter of fiscal 2019," said Jerome Grant, UTI's Chief Executive Officer. "Our multi-pronged strategy is delivering results, with enrollments, student starts, revenue, profitability, and cash flow all coming in at or better than our expectations. As we continued to open new campuses, optimize our cost structure and footprint, and reshape our approach to marketing, admissions, operational execution and industry engagement in fiscal 2019, we have built a solid foundation for the business and have set ourselves up for the next phase of profitable growth.

"We are consistently achieving our goal of generating the majority of our inquiries from the highest converting sources, and as a result, a higher percentage of all students who inquire about UTI submit an application and ultimately start school at one of our campuses. Our newest metro campus in Bloomfield, New Jersey is on track to exceed its initial pro forma objectives and, combined with the performance of our Dallas and Long Beach campuses, is proving the metro model's power to drive growth and deliver an attractive return on investment. We also continue to optimize our campus footprint with the exiting of our Norwood, Massachusetts campus, reduction of square footage at our Exton, Pennsylvania campus and addition of new, high-demand programs like welding at several campuses.

"Looking ahead to fiscal 2020, we expect to further realize the operational and financial benefits of ongoing transformative strategies, which have the potential to be amplified as we identify new opportunities for growth. As ever, our focus also remains on delivering to UTI students a high-value education that sets them up for success while delivering the highly qualified technicians our industry partners demand and need."

Financial Results for the Three-Month Period Ended September 30: 2019 Compared to 2018

• New student starts, excluding the Norwood, MA campus, were up 10.4%; new student starts, including the Norwood, MA campus, were up 6.9%.
• Revenues increased 9.2% to $87.7 million, compared to $80.3 million driven by higher average full-time enrollment and an increase in tuition rate. One additional earning day also positively impacted tuition revenue.
• Operating expenses decreased 10.0% to $82.2 million, compared to $91.3 million. The decrease was attributable to lower contract and professional services expenses, total compensation and related costs and advertising.
• Operating income was $5.4 million, compared to an operating loss of $11.1 million.
• Net income was $5.5 million, compared to a net loss of $11.0 million.
• Adjusted operating income* was $5.8 million, compared to an adjusted operating loss of $8.6 million.
• Adjusted EBITDA gain* was $10.4 million, compared to an adjusted EBITDA loss of $4.1 million.

Financial Results for the Year Ended September 30: 2019 Compared to 2018

• New student starts, excluding the Norwood, MA campus, were up 11.5%; new student starts, including the Norwood, MA campus, were up 8.8%.
• Revenues increased 4.6% to $331.5 million, compared to $317.0 million driven by higher average full-time enrollment and average revenue per student, along with one additional earning day. These increases were partially offset by a decrease in industry training revenue.
• Operating expenses decreased 3.7% to $339.3 million, compared to $352.2 million. The primary drivers of the decrease were lower advertising expenses, contract and professional services expenses, student training aids and total compensation and related costs.
• Operating loss was $7.8 million, compared to $35.3 million.
• Net loss was $7.9 million, compared to $32.7 million, which included a $3.0 million tax benefit.
• Adjusted operating loss* was $1.7 million, compared to $25.7 million.
• Adjusted EBITDA gain* was $17.0 million, compared to an adjusted EBITDA loss of $7.8 million.
• Cash flow provided by operating activities was $21.7 million, improving $35.1 million due to the higher profitability and increased deferred revenue as a result of the timing of student starts.
• Adjusted free cash flow* was $20.7 million, improving $34.0 million.

*See "Use of Non-GAAP Financial Information" below.

Student Metrics

** Starting with the third quarter fiscal 2019, UTI reported operating metrics, such as students starts, excluding its Norwood, MA campus. As previously reported on the Current Report on Form 8-K filed with the SEC on February 19, 2019, Norwood stopped accepting new student applications in the second quarter of fiscal 2019. UTI currently expects to fully close the campus before the end of fiscal 2020. As such, the company believes it is appropriate to exclude its impact.

Fiscal 2020 Financial Outlook

"We believe the company is well positioned to deliver consistent growth in revenue, profitability and cash flow," said UTI Chief Financial Officer Troy Anderson. "For fiscal 2020, we are projecting steady growth in enrollments and student starts. We expect UTI to grow revenue for a second straight year, to be profitable on a full-year basis, and to further increase cash flow."

¹ FY 2020 guidance equates to year over year revenue growth of 2.0% to 4.0%, which includes a 1.0% to 1.5% net negative impact from the Norwood, MA campus exit.

² FY 2020 guidance includes the impact from ASC 842 adoption. Refer to schedule on page 12.

Conference Call

Management will hold a conference call to discuss the 2019 fourth quarter and year-end results today at 2:30 p.m. MST (4:30 p.m. EST). This call can be accessed by dialing 412-317-6790 or 844-881-0138.  Investors are invited to listen to the call live at https://investor.uti.edu.  Please access the website at least 10 minutes early to register, download and install any necessary audio software.  A replay of the call will be available on the Investor Relations section of UTI's website for 90 days or the replay can be accessed through January 2, 2020 by dialing 412-317-0088 or 877-344-7529 and entering pass code 10136811.

Use of Non-GAAP Financial Information

This press release and the related conference call contains non-GAAP (Generally Accepted Accounting Principles) financial measures, which are intended to supplement, but not substitute for, the most directly comparable GAAP measures.  Management chooses to disclose to investors these non-GAAP financial measures because they provide an additional analytical tool to clarify the results from operations and help to identify underlying trends.  Additionally, such measures help compare the company's performance on a consistent basis across time periods.  Management defines adjusted EBITDA as net income (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. Management defines adjusted operating income (loss) as income (loss) from operations, adjusted for items that affect trends in underlying performance from year to year and are not considered normal recurring cash operating expenses.  Management defines free cash flow as net cash provided by (used in) operating activities less capital expenditures.  Management defines adjusted free cash flow as net cash provided by (used in) operating activities less capital expenditures, adjusted for items not considered as part of the company's normal recurring operations.  Management chooses to disclose any campus adjustments as direct costs (net of any corporate allocations).  Management utilizes adjusted figures as performance measures internally for operating decisions, strategic planning, annual budgeting and forecasting.  For the periods presented, this includes consulting fees incurred as part of the company's transformation initiative, startup costs related to the Bloomfield, NJ campus, and the teach out and closure of the Norwood, MA campus.  To obtain a complete understanding of the company's performance, these measures should be examined in connection with net income (loss), operating income (loss) and net cash provided by (used in) operating activities, determined in accordance with GAAP, as presented in the financial statements and notes thereto included in the annual and quarterly filings with the Securities and Exchange Commission.  Since the items excluded from these measures are significant components in understanding and assessing financial performance under GAAP, these measures should not be considered to be an alternative to net income (loss), operating income (loss) or net cash provided by (used in) operating activities as a measure of the company's operating performance or liquidity.  Exclusion of items in the non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring. Other companies, including other companies in the education industry, may calculate non-GAAP financial measures differently than UTI does, limiting their usefulness as a comparative measure across companies.  A reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP measures are included below.

Information reconciling forward-looking adjusted EBITDA, adjusted operating income (loss) and adjusted free cash flow to the most directly comparable GAAP financial measure is unavailable to the company without unreasonable effort. The company is not able to provide a quantitative reconciliation of adjusted EBITDA, adjusted operating income (loss) or adjusted free cash flow to the most directly comparable GAAP financial measure because certain items required for such reconciliation are uncertain, outside of the company's control and/or cannot be reasonably predicted, including but not limited to the provision for (benefit from) income taxes. Preparation of such reconciliation would require a forward-looking statement of income (loss) and statement of cash flows prepared in accordance with GAAP, and such forward-looking financial statements are unavailable to the company without unreasonable effort.

Safe Harbor Statement

All statements contained herein, other than statements of historical fact, are "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended.  Such forward-looking statements include the following: the company's belief that it has built a solid foundation for the business and has set itself up for the next phase of profitable growth; the company's expectation that the newest metro campus in Bloomfield, New Jersey is on track to exceed its initial pro forma objectives; the company's belief that in fiscal 2020, it will further realize the benefits of the transformative strategies; the company's plans to refine the durable cost structure reductions made in 2019 and identify new opportunities for growth; the company's belief that it is well positioned to deliver consistent growth in revenue, profitability and cash flow; the company's projection of steady growth in enrollments and student starts for 2020; and the company's expectation to grow revenue for a second straight year, to be profitable on a full-year basis and to further increase cash flow.  Such statements are based upon management's current expectations and are subject to a number of uncertainties that could cause actual performance and results to differ materially from the results discussed in the forward-looking statements. Factors that could affect the company's actual results include, among other things, changes to federal and state educational funding, changes to regulations or agency interpretation of such regulations affecting the for-profit education industry, possible failure or inability to obtain regulatory consents and certifications for new or expanding campuses, potential increased competition, changes in demand for the programs offered by UTI, increased investment in management and capital resources, the effectiveness of the recruiting, advertising and promotional efforts, changes to interest rates and unemployment, general economic conditions of the company, the adoption of new accounting standards including the new lease accounting guidance, and other risks that are described from time to time in the company's public filings. Further information on these and other potential factors that could affect the financial results or condition may be found in the company's filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date of this press release. Except as required by law, the company expressly disclaims any obligation to publicly update any forward-looking statements whether as a result of new information, future events, changes in expectations, any changes in events, conditions or circumstances, or otherwise.

About Universal Technical Institute, Inc.

With more than 220,000 graduates in its 54-year history, Universal Technical Institute, Inc. (NYSE: UTI) is the nation's leading provider of technical training for automotive, diesel, collision repair, motorcycle and marine technicians, and offers welding technology and computer numerical control (CNC) machining programs. The company has built partnerships with industry leaders, outfits its state-of-the-industry facilities with current technology, and delivers training that is aligned with employer needs. Through its network of 13 campuses nationwide, UTI offers post-secondary programs under the banner of several well-known brands, including Universal Technical Institute (UTI), Motorcycle Mechanics Institute and Marine Mechanics Institute (MMI) and NASCAR Technical Institute (NASCAR Tech). The company is headquartered in Scottsdale, Arizona. For more information, visit uti.edu.

Company Contact:
Troy R. Anderson
Chief Financial Officer
Universal Technical Institute, Inc.
(623) 445-9365

Investor Relations Contact:
Moriah Shilton
LHA Investor Relations
(415) 433-3777
UTI@lhai.com

The employment calculation is based on all graduates, including those that completed manufacturer specific advanced training programs, from October 1, 2017, to September 30, 2018, and October 1, 2016, to September 30, 2017, respectively, excluding graduates not available for employment because of continuing education, military service, health, incarceration, death or international student status.

Impact of the Adoption of ASC 842, Leases

UTI adopted ASC 842 effective October 1, 2019.  The adoption of the standard will result in the recognition of operating lease right-of-use assets and operating lease liabilities based on the lease portfolio as of October 1, 2019.

In addition, we have two build-to-suit leases that were accounted for as financing obligations and related assets because we had continued involvement in the related facility after the construction period was completed. The financing obligations will be classified as operating leases in accordance with the new standard as of the transition date including recognition of operating lease right-of-use assets and lease liabilities.  The change will result in the derecognition of the existing deferred financing obligation and related assets.  The cumulative impact of the derecognition of these financing obligations as of October 1, 2019, will be an increase in stockholders' equity. The reclassification will also result in the recognition of rent expense, which was previously reported as interest expense under the former accounting guidance.

The following represents management's best estimates of the effects of adopting ASC 842 at the time of the preparation of this press release. UTI's fiscal year 2020 guidance includes the impacts noted below.

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SOURCE Universal Technical Institute, Inc.